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What Spring House Hunters Should Know about Homeowner’s Insurance

April 17, 2012

Spring is the time for new beginnings, and if a new home is on your list, you’ll also need to shop for homeowner’s insurance. Getting the right coverage on your home is vital; after all, it is your biggest investment. There are a variety of types of homeowner’s insurance available to Canadians, and as you shop around for that dream home, you should also be shopping around for the right policy to cover it.

Types of Homeowner’s Insurance

In Canada, insurance companies may offer a selection of policies with varying levels of coverage. The main difference in these is found in what perils they cover; that is, what potential sources of a loss the policy provides for. In a named peril policy, the only perils that are covered are those specifically listed in the policy. These generally include fire, theft, and some sources of water damage. If the peril is not listed then there is no coverage for that peril.

In a comprehensive policy, on the other hand, all perils are generally covered with the exception of those that are specifically excluded. The most commonly excluded perils are flood and earthquake. With this type of policy, if it isn’t excluded, then it is covered. This is the most popular type of policy because it provides the best coverage.

There are a couple of other types of policies. A broad from policy combines the named perils with the all perils policy. The building itself is covered for all perils, while contents are covered only for named perils. There are also very basic policies available with limited coverage; these are most often used for dwellings that do not meet the standards for higher levels of coverage.

Choosing Your Insurance Policy

In most cases, a comprehensive policy is the best choice for complete coverage of your home and its contents. There are a variety of situations in which you might select a different level of coverage, however. If the house needs to be renovated, and thus does not qualify for a comprehensive policy, you might start with a lower type of policy and then upgrade when renovations are complete.

A broad form policy can sometimes save you money on your home insurance, as can a named perils policy. It’s important to bear in mind however that you take on a higher risk of having to pay out of pocket for repairs with named perils policies. Every homeowner must decide how much risk they are willing to take on, and whether it is worth it to save some money on insurance.

You may want to consider an additional policy for earthquake or flood coverage if you are in a high-risk area, as standard homeowner’s insurance does not provide coverage for these perils. Be sure to find out what your risks are in terms of flood before you purchase a home.

What Affects Homeowner’s Rates and How to Save

Just like an auto policy, there are a number of different factors that will have an impact on the cost of a homeowner’s insurance policy. Where the home is located, the type of construction, the size of the home, and its features are all part of the puzzle. Certain features on a home will have more impact than others. A pool, for example, can cause higher rates due to the liability risk that it presents. Large homes with high-end appointments will cost more to ensure than a basic home with standard features. A home located in an area that has a high statistical rate of break-ins will generally have a higher premium than the same home in a safer neighbourhood. These are all things to consider when selecting a home to purchase, and getting quotes while you shop is helpful in the process.

The best way to save money on home insurance is to take the time to shop around and get home insurance quotes. Many first-time homebuyers don’t treat homeowner’s insurance as a product they should shop around for, but just like your car insurance you can save a lot of money by comparing quotes. You might get a better policy for the same or less by shopping around.

Many companies offer discounts for combining your auto and your home insurance with them. This might be a good time to shop your auto insurance around as well; you might wind up paying less on all of your insurance policies if you shop for rates at the same time. You can also see reduced rate on your insurance by selecting a higher deductible; this is generally preferable to selecting a policy with lower coverage as a way to save money.

If you’re shopping for a new home this spring, make shopping for the right insurance a part of the process. This way when you find that dream home, you will know you have taken the right steps to keep it properly protected.