Insurance And Real Estate: What You Need To Know
Often when people think about buying a home, the last thing on their mind is insurance. Once an agreement of purchase and sale is complete, there are big decisions to be made about insurance. These decisions can have a big impact financially and on the lives of your loved ones in the event of a fire, flood, natural disaster, or even death.
There are several different types of insurance to consider when buying a home. Keep reading to learn about the different types of insurance and what they can offer.
Home insurance generally covers any major issues with your home, including:
- Natural disasters
Things such as plumbing, electrical, and age of roof impact what your insurance will cover and how expensive your rates will be. Some insurance companies will charge more if you live in close proximity to a flood plain (and other companies might not give you a policy that covers water damage).
Insurance is definitely something to think about before making an offer on a property. If you are worried that you might not be able to get coverage, you can always discuss with your realtor. He or she might recommend putting in an insurance condition to ensure you can get coverage before firming up your offer.
Although not mandatory by law in Canada, most lenders will not give you a mortgage without proof of insurance prior to your closing date.
When dealing with your Real Estate Lawyer, you will often be asked if you want to invest in Title Insurance. As a first time home buyer, you may not have heard of this type of insurance.
Title insurance is a way you can protect yourself from the potential loss if your purchase was to become invalidated. A purchase becomes invalidated when there is an issue with the title of the property that wouldn’t allow for the sale to go through.
Lawyers do title searches prior to closing to try to mitigate the risk of this happening, however, sometimes mistakes are made and things are overlooked or missed. It is important to discuss these risks with your lawyer before deciding if Title Insurance is right for you.
Mortgage Insurance Vs. Mortgage Protection Insurance
Although these two types of insurance sound very similar there are some important differences between the two (that could have some big implications for you and your loved ones). Mortgage insurance is offered through lenders and helps them mitigate the risks of lending you the money for your mortgage. This type of insurance covers the balance of your mortgage and makes the mortgage lender the beneficiary. As you pay off your mortgage your coverage decreases and when your mortgage is paid in full your coverage ends.
Mortgage protection insurance is often offered by a third party like Sun Life Financial and can offer similar yet sometimes more favourable coverages and options. This type of insurance can cover both you and your family members for your mortgage and any other debts you have as well. You are able to name your beneficiary so they can decide what to do with the money, and the amount of coverage stays the same for the entire policy and doesn’t decrease as your mortgage decreases.
There are definitely pros and cons to both and insurance experts should be consulted for these matters.