Your First-Time Homebuyer’s Guide to Insurance
It is projected that 2023 will see the real estate market cooling down, which means it will be prime time for first-time home buyers and even those looking to buy their second home to upgrade for their family. Part of owning a home is having insurance on the home to make sure you, and your family, are protected if something should happen. If you have never had home insurance before here's what you need to know about it.
Why do you need home insurance?
Similar to how you have insurance on your car, having insurance on your home can help protect you in the event that a major incident occurs, and you need to repair your home.
Homeowner’s insurance can help protect you from water damage, foundation issues, vandalism and more. If something happens it can be a major expense, which means a lot of money out of your pocket. When you have insurance, you may have to pay a deductible, but you may not have to pay for the entire repair.
Things that could increase your home insurance premiums.
There are certain things about a home – like wiring or plumbing – that can cause the premiums on home insurance to increase. Knowing what these items are is very helpful when shopping for a home because you will know the questions to ask and determine if certain parts of your home will cost you a little more money in the long run.
There could also be other aspects of your home that make it less expensive for insurance – like a security or alarm system. These would be things to talk to your broker about and determine what to look for when shopping for a new home.
Mortgage insurance vs. homeowner’s insurance
When you are working with your mortgage broker, they may offer you a product called mortgage insurance. This is not the same as homeowner’s insurance, and you do not have to have it by law.
Mortgage insurance is a policy that will take care of your mortgage payment, or balance, in the event that something happens to you. For this type of insurance, there is usually no underwriting so anyone who has a mortgage may be offered this product.
While you aren’t legally required to have mortgage insurance, it can give you some security knowing that your mortgage will be taken care of if something happens to you and your family will be able to continue living in the home without having to worry about those payments. Now, if you have an insured mortgage (as opposed to a conventional one) you will have some coverage there but that really only protects the lender and their investment. If you become ill, it won’t help you. So you will need to determine if mortgage insurance is right for you, but don’t feel as though you have to take it.
The downside to mortgage insurance is that, for some policies, it’s a declining payout amount. So what this means is that it only covers the amount you have left owing on your mortgage but your premiums do not change. So the coverage will decline over the years as you pay down your mortgage balance. Because of these downsides, insurance brokers may suggest looking into term life insurance instead which in some instances may offer better protection.
Contact ICD Insurance today.
If you are in the market for a new home this year, or you have recently purchased one, make sure you have the right insurance in place to fit your needs. Call us today to speak to a broker.