Paying for Peace of mind
Insurance
The insurance requirements associated with home ownership can be complex as there is no one-stop insurance shop to fill every insurance need. Some insurance is placed by your lender or mortgage broker, some by an insurance broker, and some by your lawyer.
This section provides a brief overview of the various types of home-related insurance. Please seek quotations from the relevant insurance expert for each type of insurance. Carefully review coverage, limits, restrictions, rates, and overall policy suitability to ensure that your insurance needs are being appropriately met. You do not need every type of insurance; however, if something goes wrong the appropriate insurance becomes the bargain of a lifetime.
1. Homeowner’s Insurance
What is it?
Just as one would not drive a car without insurance, one does not own a home without this basic insurance. Homeowner’s insurance protects your home against hazards such as fire, smoke, wind, hail, and acts of vandalism. It would also provide liability coverage against injury to any of your visitors.
Is it required?
Your lender will require Homeowner’s insurance coverage in an amount equal to your mortgage. This is required because the lender could be left without security for its loan in the event of property damage or loss.
Options
Most homeowners opt for a homeowner’s policy that also protects the contents of the home. Contents protection coverage can also be for full replacement value.
HINT: Non-smokers often get rate discounts. Monitored burglar alarms often get rate discounts.
Where do I get it?
Contact your general insurance broker or agent for advice and coverage.
2. Mortgage Life Insurance
What is it?
This is a life insurance policy with the amount of insurance being equal to the principal amount of the mortgage. In the event of the mortgagor’s death, the balance of the mortgage is paid off.
Is it required?
Lenders do not usually make their commitment to place a residential mortgage with a buyer contingent upon the buyer taking out mortgage life insurance. An exception to this would be mortgages for very high amounts.
Where do I get it?
Through the lender or mortgage broker at the time you take out your mortgage.
3. Mortgage Insurance, or Mortgage Loan Insurance, or Mortgage Default Insurance (not to be confused with Mortgage Life Insurance)
What is it?
Mortgage Insurance, Mortgage Loan Insurance, and Mortgage Default Insurance are all the same. They describe the mortgage insurance through CMHC which protects lenders of high ratio mortgages against mortgagor default. They are not one of the insurance policies that purchasers consider buying for their own benefit.
4. Title Insurance
What is it?
‘Title’ legally describes the ownership of land. Purchasers want assurance that the property they are buying will legally be theirs and they will receive ‘good and marketable title’ to it. Those with any claim to your property should be restricted only to any mortgagee(s) and the government if taxes are not paid. Title Insurance eliminates the risks of a defective property title by providing the compensation necessary to rectify covered title defects. Most policies also pay the cost of defending against any covered claim. Unlike Homeowner’s Insurance which protects you from an unforeseen event in the future, Title Insurance protects you from an undetected defect or fault in the past.
What is a title defect?
The following are some examples of hidden title defects that a title insurance policy could typically cover: unsatisfied mortgage, lien, or judgment; fraudulently discharged mortgage(s); missing heirs, etc.; improperly executed deeds; irregularities or errors in existing surveys; required removal of existing improvements; unregistered easements or rights-of-way; …the list could go on and on.
If I don’t have title insurance, how serious could a claim be?
It could be very serious. You would have to pay all defense costs and a claim could result in complete loss of equity if defense were unsuccessful. Title insurance means that you do not have to worry about any mistakes in titles.
How much does it cost?
Should we get it?
The cost of title insurance is a few hundred dollars. We encourage purchasers to consider buying title insurance not because of the fairly small likelihood of an undiscovered title defect but because of the cost savings provided. Some savings are even significant enough to almost completely pay the cost of some title insurance policies.
What cost savings are there if I get title insurance?
In usual transactions lawyers not only search title but also obtain certificates of clearance from the zoning department, work orders, liens, hydro, etc. If the property is title insured then the lawyer can skip some of the searches as the need for them is redundant. If there were to be a problem discovered on any search then the insurance would pay to resolve it. As municipalities increase their search fees title insurance becomes more cost effective. On some properties the savings amount to several hundred dollars.
