Protect Your Largest Investment

First-time home buyers tend to get very excited about the prospect of getting their new house, with a little anxiousness when they first take possession. It’s a new, huge responsibility. But adequate insurance can remove the stress from the equation.

Here’s what you need to know about homeowner’s insurance:

Type #1: Basic

This is also referred to as ‘named perils’ coverage. It offers protection only against fire and a few perils or types of loss specific listed in the policy. If the event isn’t included in that list, then you aren’t covered. This is generally the least expensive option, but transfers a higher level of risk onto the homeowner.

Type #2: Comprehensive.

This covers all risks, except for those specifically listed in your policy as being excluded. Typical exclusions are considered uninsurable events like “faulty workmanship” (which should be covered by home warranty programs) or “war and terrorism” or certain “expected hazards” (e.g., if you decide to build your house with plumbing in an unheated sunroom, you’d almost definitely need to stock up some money in the bank as “freezing of water pipes in a portion of your home not normally heated during the winter” is excluded under the policy.  But these are call comprehensive policies because they typically provide the most ‘comprehensive’ coverage available.  This type of policy covers the home itself and all the personal possessions or contents within.

Type #3: Broad

This is the middle-ground option. It offers full comprehensive coverage on the home, but only basic coverage on the possession or contents within (i.e., if you don’t add the specific item onto the policy, it isn’t covered). This is popular for younger families who often haven’t collected many expensive belongings like art, jewellery, or high-end electronics.

Type #4: No frills

This is typically reserved for properties that don’t meet minimum standards for normal insurance (such as fixer-upper projects or unoccupied or vacant dwellings). It wouldn’t apply to a primary residence, or to any contents of the building.

Frequently Asked Questions

What is “actual cash value” vs. “replacement cost”?

When you insure an item, you typically cover it for the amount you originally paid for it (the “replacement cost”).  Some items however might cost more to purchase new than you originally paid for it (e.g.  you bought a big-screen TV on a Boxing Day Sale).  You will want to ensure your carry a limit of insurance adequate to purchase all of your possessions or contents with brand new if you need to.

Additionally, you might only be able to cover some of your items for the amount you could sell them for on the open-market (the “actual cash value”), which is often significantly lower.  This typically happens when you have items that can not be replaced with brand new (e.g. antiques or collectibles like coins or collector cards).

Do I still need to register specific belongings if I have a comprehensive policy?

Yes. The policy will provide an overall limit for the collection of all your possessions, but that might not accurately reflect your specific situation, and even comprehensive policies have limitations on the amount they will pay for certain types of possessions (e.g. higher valued jewellery, expensive artwork, large wine collections, or expensive sporting equipment like professional road or mountain bikes). We’d strongly encourage that you specifically register any high-value items.

Does a homeowner’s policy cover 3rd-party liability?

Yes, though the coverage amount will vary with the policy. You may want to increase your personal liability limit, particularly if you have higher net personal assets which you would want to protect in the event of a lawsuit for injury or damages you might cause to others.

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