Insurance is the last thing you should have to worry about as you’re moving into your new home. You wouldn’t be the first person to wonder how it works differently between houses, condos, and rental units. You’re in the right place to find out, in this article we will cover the fundamentals and differences between property insurance policies.
The Basics of Home Policies
Certain things appear in every kind of home insurance policy, so it’s worth knowing how they work and why they’re in your policy in the first place.Once you understand these basic concepts, everything else falls into place.
Personal liability coverage comes with all home insurance plans, and it’s more important than most people realize. It covers the legal costs associated with being sued in the event that someone is injured on your property and takes action against you.
Situations like this could include neglected repairs, such as a railing that gives way, or rotted supports underneath a backyard porch. It could even be as simple as someone slipping on ice on your driveway.
“No one needs it” until they really need it. Legal costs can be prohibitively expensive, making the coverage a no-brainer.
You’re not just insuring the structure, but all the stuff inside of it as well. We accumulate a lot of stuff over time even inside apartment units or small condos.
Your TV, computer, phone, furniture, books, movies, mementos, and even kitchenware all factor into this. If you’re a home owner, then remember to include the cost of your appliances, too!
Most insurance companies won’t even write policies with anything less than $30,000 in contents coverage these days, since people collect so much more than they realize. Small policies with $10,000 in coverage just don’t account for everything these days.
Like other insurance policies, standard home insurance comes with a deductible. This means that you’ll need to pay an agreed-upon amount to cover smaller costs before the insurance company pays for anything—it’ll be outlined in your policy too, of course.
Deductibles can be adjusted, most commonly to $500 or $1,000. Higher deductibles lower your annual premiums because the insurance company knows it’ll be less likely to have to pay out a claim.
Exclusions exist on all standard home insurance policies, and they’ll be named right in the policy. These exclusions usually include:
- Occurrences tied to a lack of maintenance (e.g. not repairing the roof, then experiencing a leak)
- Scenarios common to a given area (overland flooding in a flood plain)
- Damage from animals or insect infestations
It’s possible to get coverage for exclusions, but that also comes with a proportional increase to your annual premium.
It’s also possible to get an “all risk” policy that covers a wider range of damage sources, thankfully.
How Condo Insurance Differs
Condo insurance works a little differently from insurance for owners of detached houses, although that can be boiled down to a few key elements.
Condo insurance covers your individual unit, but it’s also a part of something larger called the master policy. This is usually owned and run by the condo corporation.
The master policy insures common areas, like a hallway in a condo building or the outside of the building. Your condo association will be able to tell you more about its particular policy.
Upgrades to Condo
Some master condo insurance policies do cover damage to individual units, but it’s not always the case (you’ll have to check with your condo association to be sure).
If the master policy does cover certain kinds of damage, then it will only cover the cost of the default furnishings—the original floors, counter tops, and so on.
Any upgrades you make to the unit probably won’t be covered by the master policy, which is why it’s also wise to keep your own policy.
How Tenant Insurance Differs
Tenant insurance tends to represent the smallest of these three types of home insurance. It works a lot like regular home insurance, but it doesn’t cover the cost of the building itself.
Depending on the price your insurance company quotes, it’s also worth looking at coverage for additional living accommodation. This means that if another tenant starts a fire in your building and you’re forced to evacuate for 2 months, the policy will cover the cost of putting you up in a hotel until you can move back in.
Tenants often think they don’t need home insurance, and although that might be true, you can expect landlords to require proof of a home insurance policy before agreeing to hand over the keys.
Have any unanswered questions or would like to learn more about purchasing or renting a home? Visit Dwelly.ca where you can ask questions anytime via our live chat.
Toronto Real Estate: Buy - Rent - Invest