Home Insurance
Home Insurance is critical. Most Buyers purchasing a property need to arrange financing, so mortgage lenders require Buyers/mortgagors to carry fire and extended coverage insurance. Policies range in prices from company to company based on the type of policy requested, and the worthiness of the Buyer. The ability to obtain property insurance is a necessary component of any real estate transaction. Without home insurance, a Buyer cannot obtain a mortgage, and without a mortgage, the transaction falls apart.
Insurance companies have tightened the rules and have become less willing to insure some types of property. Issues such as: outdated wiring, or furnaces more than 20 years old, amongst other things, raise red flags of concern.
When looking at a home, insurance companies consider its age and condition - including the electrical system, plumbing, heating, wood burning appliances, oil tanks, and structural components. They want to know if the property will be owner occupied, rented, or left vacant. Insurance companies also look at the 'individual' applying. Individuals with a number of previous claims, a history of payment problems, policies that have been cancelled, declined or lapsed, a poor credit rating, or convictions for insurance fraud, are likely to see their applications declined, or a surcharge added to their premium.
A home inspection is always recommended for any property a Buyer chooses, but it's particularly important if the home is an insurance risk. Sellers who have these types of houses should consider a pre-listing inspection report, which might outline potential problems with their home. You could then take care of any necessary repairs in order to make the property insurable before it goes on the market, and of course, there's a stronger chance your deal will close successfully when the issues have already been addressed. In addition, a home inspection report, provided by the Seller or the Buyer, and given to an insurance company, may make it easier to acquire insurance.
The representative who insures your current home, apartment, or automobile, is the best place to start when obtaining insurance. They already have information about you and many companies offer a discount if they insure both auto and property. Buyers should work with their insurance broker to find an insurer that covers the type of property they are considering. For example, some companies will only underwrite homes in certain geographic areas - others may not insure homes with underground oil tanks, or homes over 50 years old. Other concerns include knob and tube wiring, aluminum wiring, 60 amp electrical services, galvanized steel plumbing, old roofs, mould, grow houses, asbestos, income properties, home-based businesses, expensive cottages on private roads, and even vicious dogs.
In cases where you cannot obtain insurance in the regular market, there are substandard and specialty markets available. However, they do not deal directly with the public. An insurance representative may be able to arrange insurance, but premiums are usually higher and coverage may be less.
Buyers are always protected with a condition in their Agreement of Purchase and Sale regarding home insurance. It usually runs in tandem with the conditions on financing and home inspection for a certain period of days, normally 5-10. You have this allotted time to obtain your home insurance so you can fulfill your condition, failing which, the offer becomes null and void. It's critical to inform your insurer immediately after accepting an offer so they can do the necessary work to insure your future property, especially if it has possible risks.
