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What First-Time Home Buyers Need to Know About Insurance
Moving into a place is exciting—and more space than most of us know what to do with after living in apartment buildings for years.
Your home insurance evolves too. Follow these tips to make sure you’re still covered for everything that you need before you need it, and you’ll be safe and sound in your new crib for as long as you stay there.
Your Home Can’t Stay Vacant for Long
Owning your own place means that you’re responsible for its condition, even when you’re away travelling. That means you need to have someone check on your home every day to keep home insurance valid.
That’s not a big deal for most people, but just keep in mind that you need to have some friends in your corner if you want to get away for more than a weekend—even if it’s just to the cottage for a week.
In most home insurance policies, someone needs to check in on your house (actually walking around inside it) once per day while you’re away. Recruit some people like this:
- Make friends with the neighbours
- Ask family members to check in (if they’re close by)
- Ask a trusted coworker
It’s one of the easiest things to do, but it’s so important to keep your insurance policy from becoming void when you really need it.
Prepare to Increase Your Contents Insurance
Everybody needs contents insurance (even renters), but people tend to set their limits too low. They get a contents insurance policy in their early 20s, set it at around $10,000, and then forget about it for 10 years. Some insurers may require a minimum of $30,000 in coverage, but it’s best to double-check just in case.
But they accrue tens of thousands of dollars’ worth of belongings in that time. It’s very reasonable for young couples to raise their contents coverage limits between $30,000 and $50,000 , after factoring in:
- Televisions and video game consoles
- Desks, chairs, and office supplies
- Clothing (especially formal wear)
- Book collections
- High-value items like bicycles and camping gear
It doesn’t cost that much, but it definitely helps to protect your finances if something goes wrong.
Your Credit Score Is Used to Calculate Home Insurance
Insurance companies aren’t allowed to look at your credit score while underwriting your car insurance in all provinces (like Ontario), but they are allowed to look at your credit score for home insurance.
Having a good credit score can show insurers that you’re a low risk, which improves your chances of seeing lower rates.
That’s pretty common for things like mortgages and car payments, so it’s not necessarily a big deal. However, if your credit score is below 500, then you might want to look at getting a home insurance policy separate from your auto policy—especially if you’ve earned some demerit points and made some claims in the last 3 years.
On the other hand, it can work in your favour. If your credit score is good (above 600, for example), then you can actually save a fair bit of money by bundling your home and auto policies together. Insurance brokers can find the discounts for you, but it’s pretty common to see around 15% savings on the auto policy and around 30% – 50% savings on your home policy.
Claims Aren’t Based on Market Value
In the buzz and excitement of buying our own homes, the details can slip past us. One of those details is how insurance providers reimburse you if you make a claim on your home policy.
A lot of people out there think they’ll be reimbursed based on the value of their property, but that’s not the case. Home insurance payouts are usually made according to the cost to rebuild, which is entirely different. It’s about the cost of labour and materials needed to restore the building—not paying the market price for the entire property.
Some policies on older homes may pay out claims based on the actual cash value of the home, but it’s not too common these days.
It can change the way we think about our insurance coverage and what kind of financial position that creates, so always pay attention to the small print!
Stay on Top of Maintenance and Repairs (Seriously)
Maintenance is a big deal in home ownership. There’s no landlord to call. You might have a condo association cover certain repairs, but owners of detached homes don’t have that luxury either.
It’s not just about paying for repairs yourself. On the insurance side of things, any deterioration or decay left long-term could lead to more immediate and larger kinds of damage:
- Cracks left in the foundation could lead to a flooded basement.
- Putting off roof replacements for too long could lead to a collapse or serious leak.
If you make a claim for that damage and the insurance company finds out that it was caused by long-term issues that were never fixed, then they will very likely deny the claim based on negligence.
That kind of situation would leave you paying for the insurance and paying for the repairs out of your own pocket.
Follow those tips and you’ll be in good shape for all things home insurance. Enjoy your new place!
BY AHA INSURANCE