If you are buying a home and enter into a mortgage, your mortgage lender is going to require you to have home insurance. This type of insurance usually covers you for the cost of personal belongings in your home and the replacement value of your home. Here are a few things you should know about home insurance when evaluating what kind of home insurance to purchase.
Your lender will provide funds for your mortgage after you have proven to them you have home insurance. You also have to show that you have named them on the policy as the mortgage lender. The lender wants to know that their interests are protected in case something happens to your property.
There are generally three main types of home insurance: a comprehensive policy, a basic policy and a broad policy. A comprehensive policy covers your home and possessions. Basically it will cover anything that isn’t excluded in your policy. A basic policy only covers for specific items you want to insure. A broad policy is usually a combination of the basic and the comprehensive policy.
The amount of coverage of a home insurance policy does not just depend on the type of insurance you bought. It can also depend on which insurance company you picked. Rates for policies can vary from insurance company to another, so it is often smart to look at the coverage offered by several insurance companies.
If your policy includes the guaranteed replacement coverage, then your home is protected for the amount it’s actually worth and not the policy limit. Some policies contain this clause and some don’t. It’s prudent to review your policy document to ensure the clause is there.
One of the most common exclusions for home insurance are “Acts of God”. Those are usually defined as natural disasters that are outside people’s control, such as an earthquake. Other common exclusions include water damage, criminal acts and rodents.
Our real estate lawyer at Ancaster, Ontario based firm Filice Law can help answer more of your questions about home insurance. Call us now at (905) 383-0828 or reach out to us by email.