Don Kamps
Insurance Programs
Introduction
When buying or selling real property, various kinds of insurance requirements enter into the picture.
For many clients especially the first time homeowner insurance obligations can be overwhelming.
House Insurance
When a person buys a home, there must be a Homeowner Insurance policy in place. Homeowner Insurance includes coverage for losses to a structure or personal property due to damage such as fire or theft of property. A Homeowner policy also provides liability insurance for the homeowner in the event that someone is hurt on the property and sues for damages on those injuries.
A Homeowner policy is required when obtaining mortgage financing to buy a property. The lender will require that they be listed on the policy as a first loss payable in the event that there is a significant damage claim.
It’s important to ensure that Homeowner Insurance is set up prior to a possession date and the lawyer has received written confirmation from the insurance broker that it is in place. Keys cannot be released until that happens.
Condo Insurance
A Condominium Homeowner policy is similar to standard house insurance, except that the condo policy mainly insures the inside walls of the unit. A Condominium Corporation is required to maintain structural insurance and liability insurance on the buildings and other common property, but that insurance does not extend to the personal property of a unit owner or the fixtures and improvements in a unit. Condo insurance is often a fraction of the cost of regular house insurance, but it is something that is an essential part of condo ownership.
Mortgage Default Insurance
If a person buys a home with less than twenty to twenty five percent down payment, the mortgage is classified as a “high ratio” mortgage. For example, a mortgage based on a 5% down payment is considered by lenders as risky. Fortunately there is mortgage default insurance more commonly known as the CMHC/GENWORTH fee which is added to the total mortgage. This insurance basically guarantees to the lender that in the event of a default of the mortgage by the borrower the lenders costs will be paid by the default insurer.
Title Insurance
Title insurance is another useful kind of insurance in buying and selling property. In most cases, it is not required to close a transaction because it covers certain ownership and title risks outside of the standard conveyancing process. Nevertheless, Maxwell Realty does recommend title insurance to anyone buying property due to its low one-time cost and broad range of risk coverage.
Common coverage under a title insurance policy for a home buyer includes forgery/fraud protection; zoning/permit violation issues; building location/encroachment problems; tax and utility arrears/condo fees and assessment arrears if not known at time of closing. The typical cost for most homeowners is a few hundred dollars and coverage lasts for the entire time the home is owned by that owner.
Life/Disability/Critical Illness Insurance
When someone purchases a home or condo, it is probably the most significant investment they will make in their lifetime. Many homeowners also have spouses or dependent children that may depend on the mortgage payments being made. Because of the risk that a borrower may suffer a critical illness, disability or death resulting in an interruption of mortgage payments, many lenders offer insurance to protect against this.
Often this insurance is packaged with the monthly payment of the mortgage. In the event of a claim funds are paid to cover the mortgage payments or pay the mortgage in full outright.
Conclusion
If you have questions about any of the kinds of insurance discussed above or need more information, our REALTOR® can make it available to you or refer you to a knowledgeable insurance broker for pricing quotes or coverage information.