There are several things we think about when buying a house: from the type of neighbourhood it is in, to the impact of rainfall and flooding, to whether the property is a single unit or apartment or a townhouse, to even the number of bedrooms it contains. Frankly, looking around for a new home comes with many, many considerations.
So while the aesthetics and location of your new home might be your main focus, you cannot overlook the task (and usefulness) of finding a suitable mortgage insurance. It is extremely important that you make sure you are protected in case something goes wrong with you or with your home.
To help you better understand what is involved, here are a few homeowner’s insurance considerations for new homeowners:
1. There are several major types of mortgage insurances to protect you and your home.
Homeowner’s insurance, contents insurance and life/disability insurance are easy examples of some of the main types of coverage available to a homeowner. The first type, homeowner’s insurance, covers the most important investment – your home. It applies to coverage for the structural components of your home i.e. the walls, roof, floors, fixtures and fittings.
Personal Property or contents insurance includes coverage for the same risks to your valuables in your home, and also theft. These include, for example, jewellery, art and electronics.
Life/disability insurance covers you in three broad instances: (1) where you are unable to work or total disability; (2) temporary disability, for example if you lose your job or you are unable to work because of poor health, and (3) in the event of your death.
2. Mortgage lenders usually require homeowner’s insurance.
Homeowner’s Insurance is that safety net that can protect your home in the event of some unfortunate situations.
It is very important to note that homeowner’s insurance is a legal requirement when getting a mortgage. Borrowers need to ensure that they have this insurance in place, and that it covers the full value of their property.
Once you are in a mortgage arrangement or in the process of buying a home, you should make sure you have this coverage in place, because when you exchange the mortgage contracts, both you and the lender both have a financial interest in the property that must be protected.
At TTMB we offer coverage under their Group Homeowner’s Insurance. With the Group Homeowner’s Insurance, you are required to pay one year’s premium, in advance, at the closing of your mortgage. Find out what you need to know about Mortgage Insurance.
You do have the option to seek this coverage on your own or elsewhere, but remember, it must be in place before any monies are disbursed to acquire your property.
3. Your homeowner’s insurance must cover the full replacement cost of your home.
Usually, a condition of your mortgage arrangement is generally that the insurance coverage on the mortgaged property be maintained at the full replacement value of your home, throughout the term of the loan. You should have enough insurance to cover the rebuilding cost of your home. In other words, if your property unfortunately gets burnt to the ground, the homeowner’s insurance should pay for it to be rebuilt.
A replacement cost valuation is recommended every five (5) years, to ensure that the insurance coverage is on par with the replacement value of your property. But remember that the rebuild cost is not the same as the sale price or the current market value of your home. In fact, it is often times lower. Take a read of Mortgage Insurance for more information
4. There are other risks that may require coverage.
Instead of shouldering the full financial burden after suffering damage, you can turn to your insurance coverage which will assist you in replacing items, repairing or rebuilding.
In situations where you would have lost your job, or due to poor health so you cannot work, your family and you should be given the peace of mind that regardless of what happens, your loans will be paid off.
Most lenders require life insurance on the life of the borrower so that the loan is covered in the event of the borrower’s death.
At TTMB, while life insurance is not required, we provide an option that covers you for both death and disability. If you become totally and permanently disabled and are no longer able to work or in the event of your death, your loan balance will be paid off in full. For more information, please check out our Advance Protector Insurance.
5. Start compiling a home inventory now.
As you think about and decide on the right insurance for you, and your family, it is also handy to have something called a home inventory. A home inventory is really very simple. Go through every room in your house and list every valuable item and its worth. This home inventory should be easily formalised and updated when necessary as it is most useful not only when damage is sustained to the home but also in instances of theft.
