Tips for Buyers: Property Insurance

02.10.2013

The Importance of Property Insurance

When it comes to owning a condo or house in Vancouver, Property Insurance is a must (even if you rent, there’s a type of insurance for you, I’ll get to that later in the post). Insurance can cover the unexpected, and for homeowners, this means theft, water damage (from pipes), fire damage, weather damage and more, to both the actual building and your personal property inside (everything from furniture, to technology, to clothing). When choosing an insurance policy, ensure it covers every situation that you’re worried about (water & fire damage insurance in condos is a must).

It’s worth it to spend money every month on insurance in order to mitigate the risk of high future costs. 

If you’re looking to buy a house in East Vancouver, your mortgage lender will require property insurance to be in place in order to lend you the money. You have to have an active policy in place before they grant the Mortgage, meaning, you have to have insurance on the property starting on the day of completion (the day the house legally becomes yours).

Since the Strata Corporation (the owners) in East Vancouver Condos have joint insurance covering the building, you will only need to get insurance to cover the deductible (on your own damages). What this means is if your toilet backs up and starts leaking through the floors into other people’s condos, the building insurance will cover the repair costs. However, since it’s your fault, you will be responsible to pay the deductible (this can anywhere from $1000 to $15,000 to more, it’s stated on the insurance plan). Your personal insurance should cover that amount. It’s not a bad idea to get your personal Condo Insurance from the same insurance company the building uses, though you’re free to use any company you like.

Getting Property Insurance

Getting Property Insurance is a really easy process – it’s usually just a phone call away. There are certain factors that can make the process a little more intricate, including:

  • the age of the house
  • the home’s insurance history
  • building materials; some outdated materials can be dangerous or potentially expensive to repair if they break down, including oil tanks, knob & tube wiring, old furnaces, etc
  • location; for example, if you’re located in an earthquake zone or far from a fire hydrant, you will require more coverage.

I’ve seen instances where Buyers haven’t gotten their property insurance in place before the completion day, which has delayed the closing of the transaction. Buyers – gather all the necessary documents, get quotes from different insurance agencies (if you want a comparison) and work through the related issues prior to the completion date. We’ll remind you, but it’s up to you to get these things in place. Often, Buyers will include “Approval for Property Insurance” as a subject in the Contract. If you choose not to do that, start inquiring about Property Insurance soon after an Accepted Offer.

Types of Property Insurance

There are a few different types of insurance policies available. 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. For example, if you have a rare collection of expensive cars sitting in your garage, you’ll want those specifically insured.
  • Broad Coverage:

    • Provides comprehensive coverage on the building, and named perils coverage on your belongings. You have to list the items to be insured.

Other things to consider:

  • Renters insurance (also called Tenants 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. new 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 and how much this will cost you.

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 & coverage, 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 have a long standing relationship with the insurer, you insure both your car and home, if you are a senior, etc.

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.

Knob & Tube Wiring and Aluminum Wiring in Older East Van Houses

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.

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.

For older homes in East Van, this is something to look into. The home seller should tell you if they are aware that it’s knob and tube wiring, and the inspector should be able to discover if it is.

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