Mark Imeson, The Windsor Star, September 23, 2009
Buying a home is probably the largest single financial investment you have ever made. For most people, their home is their life savings tied up in bricks and mortar -- bricks and mortar that, no matter how well built, are vulnerable to fire, theft and other disasters.
Could you possibly afford to replace absolutely everything you own? Recovering from even a partial loss, like having your home broken into and many possessions stolen, would cost more than most people could manage on their own. Home insurance protects you from having to pay out a huge amount at once, often at the very worst time emotionally.
There are several types of insurance policies you can purchase. Some examples include: Comprehensive -- this is the most inclusive home insurance policy, it covers both the building and its contents; Basic/Named Perils -- if you are looking to save money by carrying the financial risk of some losses yourself, you may wish to consider a named perils policy that covers only those perils that are specifically stated in the policy; Broad -- if the comprehensive policy costs more than you want to pay and the named perils policy seems too risky, a mid-priced compromise is the broad insurance policy; and No Frills -- some insurers offer very basic or "no frills" coverage for properties that don't meet their normal standards. If there are physical problems with your home that keep it from meeting insurers' standards, you may save money in the long run by correcting these problems in order to qualify for better coverage.
Before an insurance company can arrive at an appropriate premium, it must first assess the likelihood -- or risk -- that you will submit a claim. For the most part, the lower the risk -- e.g., a well-maintained home with updated wiring and plumbing -- the lower the insurance premium. (Some insurance companies specialize in riskier clients and their homes.)
Your insurance representative will ask you a number of questions in which you will have to provide information about your home such as wiring, galvanized/lead pipes, electrical services, heat source, wood stoves, age of roof, etc.
Tenants need insurance too. If you don't have insurance, you would be held responsible if your actions (e.g., leaving the bathtub running) caused damage to your apartment, your neighbours' apartment(s), or the apartment building itself.
Even if the landlord's or your neighbours' insurance covered the damage claims, their insurance companies would come to you to recover costs for repairs and/or replacement of the structure of the building or your neighbour's damaged property. Tenant insurance protects you from having to cover these costs out of your own pocket.
Insurance coverage on your home should begin as soon as you become the legal owner or tenant, even if the home is still under construction. (Your home insurance policy can also cover related building materials on or adjacent to your property.)
If you are like most people, you will probably never need to submit an insurance claim. But no one is immune to bad luck, and it is good to know that the premiums of many people like you, are available to pay for your mishaps and misfortune, should they occur.