Why is Property Insurance Necessary?
Property insurance is a must, both for the structure itself and your personal property. Insurance can cover everything from theft, water damage, fire damage and weather damage, to both your property and the items inside (everything from technology to furniture to clothing). Insurance doesn’t necessarily cover all of these factors, so if you’re nervous about certain potential issues, ensure you’re covered.
If you’re looking to buy a house in Kitsilano, a mortgage lender will require property insurance as a condition of borrowing, so you must have an active policy in place before they grant you the mortgage. Since Kits condo buildings all have insurance through the Strata, you don’t need your own insurance to be granted a mortgage, but it’s smart to get it to cover your own damages.
Factors Affecting Property Insurance
No fear, getting insurance on a property is typically a seamless process, especially for newer homes and condos. There are certain factors that can make insurance harder to obtain, including:
- age of the home
- the home’s insurance history
- building materials; some out dated building materials can be dangerous and require further investigation, including oil tanks, aluminum or knob & tube wiring (see below), gas furnaces over 20 years old, wood burning appliances, etc.
- location; i.e. building a home in an earthquake zone may require more coverage
There have been instances where property insurance issues has delayed closing, which can be attributed to the Buyer not setting aside enough time to gather all necessary documents, get quotes from different agencies or work through the issues raised. In order to avoid these issues, a Buyer can include approval for property insurance as a subject in a conditional offer, or they can file a request for insurance as soon as possible after an accepted offer.
Types of Property Insurance
There are a few different types of insurance policies. The three basic types are:
- Comprehensive Coverage: Covers the building and its contents. Typically the most expensive since it’s all encompassing and provides the most coverage.
- Basic or Named Perils Coverage: Covers your property only against dangers specifically named in the policy. This is typically bought to cover perils not typically covered in normal policies.
- Broad Coverage: Provides comprehensive coverage on the building, and named perils coverage on your belongings.
Other things to consider:
- Renters insurance: Even if you don’t own the building, you can still insure your belongings, any improvements you’ve made to the property and damage you’ve caused to the property.
- Vacation/”Empty” Insurance: If the house sits unsupervised for a long period of time, or the “empty” period when you move out and the new Buyer’s move in, you may not be covered for issues like theft, vandalism or failures (like a pipe burst).
- Cost of Repairs: You may be covered for belongings or structure that is damaged, but not for the cost of repairs necessary to get the property back up to it’s previous standards.
- Condo Insurance: Condo owners will need to get insurance covering their belongings and the structural parts of the building that they own (i.e. cabinets). The strata corporation should have insurance covering the overall building, as well as each unit (this can be found in the corporation’s insurance policy – available to all owners).
- Title Insurance: Protects Buyers against problems that may slip past a title search, i.e. failure of the previous owner to pay property taxes, prior renovations done without permits, easements, fraud, etc.)
Keep in mind that insurance companies don’t have set standards to follow when it comes to policies. The Insurance Bureau of Canada (IBC) sets out recommendations for standard criteria, but does not enforce them. Shopping around for different quotes will give you a good sense of what different companies offer in terms of coverage.
Cost of Property Insurance
The cost of property insurance varies depending on the policy and the home itself. A standard rule is the higher the risk, the more expensive the policy.
You may be eligible for discounts if: you have properly secured your home (with security alarms, smoke and fire alarms, sprinklers, etc.), you ave a long standing relationship with the insurer, you insure both your car and home, if you are a senior.
Deductibles (the initial amount of every claim that is paid by the policyholder) can also affect property insurance: the higher the deductible, the lower the premium.
For Kitsilano Condos: MAKE SURE your insurance policy at least covers the deductible. You can still be granted a mortgage if you don’t have your own personal insurance since the building has it’s own, but be smart and get some insurance to cover yourself and any problems that you may be on the hook for down the road. The AGM minutes typically have information about the condo building’s insurance provider, so you can give that company a call to see what they might be able to offer you, and to find out more information about the building’s deductible (the lower the better, typically it’s around $10,000 to $25,000). A deductible is the amount of money you would have to pay out of pocket before the insurance covers the rest on any major damage claims (which in Vancouver, is typically water damage).
Knob & Tube Wiring and Aluminum Wiring
Knob and Tube wiring was used for years, starting in the early 1900’s. Since these older homes didn’t have very many electrical outlets, homeowners over the years have been installing new outlets by tying them into the old wiring rather than starting a new circuit at the electrical panel or they have been overtaxing the circuits (causing the wires to overheat). This is where the problems occur, and you should bring in a qualified electrician to inspect and replace the wiring.
Since Kitsilano has many older homes, there is a possibility of the home having knob and tube wiring – or electrical systems that need updating. If you have your eyes set on an older (not updated) character home in Kitsilano, a home inspection is a must.
Aluminum wiring was used in the years after Knob and Tube, starting in the 1960’s. Problems include overheating and failure of the terminals, though proper installation and upgrades to the aluminum wiring can reduce concerns.