What Are the Different Types of Home Insurance?
There are many different types of home insurance, and it can be unclear to know which one you need. Do you need homeowner's insurance, flood insurance, earthquake insurance, or all of the above? Here is a quick guide to the different types of home insurance and what they cover.
Mortgage Loan Insurance
Mortgage loan insurance is a crucial product that protects the lender if a homeowner cannot repay their mortgage. Mortgage loan insurance safeguards the financial institution in case of default, allowing them to recoup their initial investment in a home loan. This type of protection enables lenders to offer lower interest rates. It provides additional access to mortgages for prospective homeowners who may lack the piece of mind of others when taking out a loan for such a large purchase. Mortgage loan insurance is a critical component of home ownership and provides peace of mind for everyone involved.
This type of insurance is mandatory for high-ratio mortgages and is only offered through two carriers: CMHC and Genworth Financial.
The homeownership process can be complicated, and you are responsible for more than just monthly mortgage payments as a homeowner. Title insurance ensures you are not exposed to potential legal issues surrounding your home's ownership, like liens or fraud from past owners. If one of these issues arises, title insurance will protect you by providing dispute resolution or damages coverage. You'll have financial protection and peace of mind knowing that an issue can be settled without putting your home at risk.
Typically, this one-time premium costs less than $500.
With the significant financial undertaking of homeownership, one of the responsibilities is having an insurance policy to cover whatever damages may be caused. Home insurance protects your home or possessions from major mishaps such as a fire, theft, or extreme weather conditions. With insurance, you can receive compensation to help you repair any damages to your home so it can be restored to its original condition. It also helps protect any possessions that might be damaged during an incident. It gives you peace of mind knowing that if anything goes wrong, no matter what the unexpected cause might be, you have insurance to help you get through it.
The cost of home insurance will vary, but it takes into consideration the following:
Size of the home
Age and condition of wiring, plumbing, heating systems, etc.
Local weather conditions
Insurers also check your financial past. If you’ve had credit problems, insurance costs rise. Like lenders, insurers will charge you for this credit check. Typically, your home insurance should cost between $400 – $1,200+ annually but will vary depending on the above factors. In Canada, homeowners pay an average of $840 annually for home insurance.
Which is Best?
These are just a few of the different types of home insurance that you may need to consider. No one likes to think about disasters or unfortunate events occurring at their home, but having the right insurance policies is essential for protecting yourself, your family, and your belongings from potential damage. Homeowners should research options to find the best policy for their needs and budget.
However, you can always speak with an insurance expert to help choose the right policies for your unique circumstances and budget. With the right coverage, you can rest assured that your home is fully protected no matter what happens.