Homeowner's insurance can unfortunately be viewed as an afterthought after the tumultuous process of buying a home. After filling out form after form just to purchase the property, few buyers want to go through the complicated paperwork of their policy. However, home insurance is an extremely handy resource for homeowners to have, and a buyer should understand what their coverage is before they decide on a particular premium.
How a Premium Is Calculated
A homeowner's premium is determined by the amount of relative risk in any given area. From the size of the home to the age of the property, the insurance company will calculate the odds of a homeowner filing an expensive claim. Homeowners should be upfront when it comes to giving the specifics of their new home.
And while it may be tempting to massage the truth to lower the monthly charges, doing so can result in a lack of coverage if the insurance company does a thorough investigation before settling a claim. For instance, if a buyer chooses to rent out their home, they'll need to pay for that privilege with a higher insurance premium. (This is because an insurance company can't verify who will be entering the home.)
Types of Homeowners Insurance Coverage
The main types of coverage include the following options:
- No-frills: This coverage is the bare minimum of coverage for homes, and it's one of the least expensive a buyer can choose.. It's so basic that not all properties are even eligible to buy it. Buyers will need to consult with their real estate agent or an insurance expert to verify if their home qualifies.
- Standard: A standard policy will list exactly what events and parts of the property are covered. Should something happen that falls outside the parameters of the policy, homeowners will be held fully responsible for all repairs.
- Comprehensive: A comprehensive policy will name exclusions rather than inclusions. It's the best possible coverage a homeowner can buy (and often the easiest to understand).
- Broad: A broad policy is a hybrid of a standard and comprehensive policy. It will provide full coverage to the property and the physical structure, and limit the coverage of the home's contents. This policy is complicated, so buyers should ask questions before they sign on the dotted line.
Predictable and Unexpected Events
A predictable event is one that a home buyer can anticipate and fix beforehand, which is why it's generally not covered by home insurance companies. For example, if giant icicles fall from the home and injure a delivery man, the insurance company would argue the homeowner should have taken care of the ice formations prior to the accident. This definition can be complex because not everyone has the same definition of predictable. However, homeowners are encourage to err on the side of caution when it comes to preventative maintenance.
An unexpected event, like a theft or a fire, is generally covered because the homeowner would have had no prior knowledge of the event occurring. However, this does not hold true for all unexpected events. Natural disasters like flooding and earthquakes may require additional coverage, so home buyers will need to clarify the terms before deciding on a policy.
When it comes to choosing an insurance company, Strathmore home buyers are highly encouraged to do their research rather than choosing based on price alone. From reviews to prices, this step can help buyers choose the right partners.
Justin Havre is the top producing REALTOR® with RE/MAX First, Canada's very first RE/MAX brokerage. Calgary real estate is his passion; Justin specializes in Southwest & Northwest Calgary homes for sale. He can be reached at 403.217.0003 or contacted through this site.