In last week's blog about home insurance, we briefly introduced what home insurance is and what a typical homeowners policy offers. However, we only covered some of the basics in the post. There are a lot more things you should know about homeowner insurance, and it is crucial for you to fully understand what it is about before buying your first home. Therefore, we have decided to make this second post. In this post, we have gathered more information to help you learn about homeowner insurance more in-depth. You should be able to get a grasp of all the basics about homeowners insurance after reading the post. If you haven't read our previous blog about home insurance, check it out now!
Types of Homeowners Coverage
Usually, your insurance company will review your claim before they decide on how to settle your claim. The amount of money you will receive from your insurance provider will depend on your insurance benefits. Keep in mind that you are responsible for paying the deductible so you may not receive the full amount of the claim. It may be reduced by the amount of your deductible.
In Canada, there are 2 types of homeowners coverage:
Actual Cash Value
Actual cash value covers the cost of the item when it was new after deducting depreciation. Depreciation means the loss of value of the item depending on the age and condition of the item. Depreciation is calculated differently based on the item insured and the insurance company. In other words, the amount you receive would be the reduced value at the time of the claim.
Replacement Value
Replacement value doesn't cover the cost of the item when it's in brand new condition but instead, covers the actual cost for you to replace an item damaged or destroyed in the event of a covered loss. In other words, if the item you wish to claim is insured, your insurer would cover the cost of buying a new one of similar quality to the one that was damaged or destroyed.
One thing to keep in mind is that if you have a mortgage, a loss payee clause will likely be included in your home insurance policy, which makes your mortgage lender your beneficiary. When you submit a claim in case of damage or loss to your home, your insurance provider will pay your lender up to the remaining balance of your mortgage. When you do so, your insurer may give the money to either you so you can fix your home, or to your lender so they can provide you with the money for repair or replacement after you submit receipts to prove they were done.
For more details, please visit the Government of Canada website.
How Are Homeowners Insurance Rates Determined?
The rates are usually determined by the likelihood of a homeowner filing a claim, which, in other words, the insurer's perceived "risk". So how do insurers determine risk? They mainly consider the past home insurance claims submitted by the homeowner and claims related to the specific property, as well as the homeowner's credit. They also consider how frequently and severe the claims are, especially if there's more than one claim relating to the same issues such as water damage. Often, if a home has had multiple claims in the past 3 to 7 years would bump the insurance to a higher pricing tier, even if the previous owner filed the claims. Worst case scenario, you may not be eligible for home insurance if claims had been filed too many times. Other factors that affect the rate include the neighbourhood, crime rate, building material availability, condition, just to name a few.
Fore more information, please refer to Investopedia.
Buying Insurance
You can buy insurance from a licensed insurance agent, a registered insurance broker, an insurance company, or a lender when you apply for a loan. An insurance company will issue your policy no matter where you buy it. You can buy insurance over the phone, on line, or in person. If this is your first time buying insurance and/or are not familiar with it, I highly recommend you to do it in person so you can have someone walk you through the process and answer any questions you may have. You may want to buy insurance from a federally, provincially, or territorially licensed insurance company as it will ensure you're protected in case your insurance company fails and you will have access to an independent dispute resolution system if you ever need to make a complaint.
For more details, please visit the Government of Canada website.
Insurance Housing
While we hope this never happens to you, in the event of damages or destruction of your home, you would need to search for temporary housing while your home is being restored/rebuilt. When searching for insurance housing, You should look for furnished accommodation as you should assume you can't bring anything from your home. All our premium suites at Avalon are fully furnished with a fully equipped kitchen and all the amenities you need. Our suites have 2x more space than your average hotel room and you get the entire place by yourself. We have a variety of suite options ranging from studios to 2 bedroom suites so you can definitely find one that accommodates your needs. We even have a washer/dryer in all our suites. With all these features, staying in any of our suites will definitely make you feel at home. We're located in the heart of Toronto's most upscale neighbourhood at the corner of Yorkville & Avenue Rd. Life goes on. You have work and you may have kids who go to school. It would be convenient for you to get to work or your kids to go to school. If you will be working from home, we offer fast wifi for free! If you need to buy anything, Whole Foods Supermarket is right across from the building at the Yorkville Village Mall or you can go shopping around Yorkville. We are also surrounded by a variety of great restaurants to fulfill all your cravings! What's even better? We offer special rates to guests who are here for relocation! Contact us at 416.731.1372 to learn more about our suites and rates!
I hope you got a better grasp of understanding of homeowner insurance after reading the post. Make sure you think about what you wish to be covered and do research before buying insurance so you know what to expect. If you are looking for temporary housing for insurance relocation, come stay with us at Avalon! To make a reservation, contact us at 416.731.1372 so we can give you a discount!