What Buyers Need to Know About Insurance
Posted by David Parry on
It it very common to see offers written "Subject to Obtain and Approving Property Insurance". When a buyer is interested in a property and begins their due diligence before purchasing, one of the many factors they must take into account is the insurability of the property and/or the cost to insure it. Remember that by obtaining a mortgage, a lender is making a significant investment in the property and as such will require that their investent is protected through an insurance policy. It's foolish for a home owner not to insure their home against loss, but practically every lender requires it as a condition of the loan!
Some property in our Victoria area contains defects which can greatly impact the ability to obtain insurance. A building's insurability may be affected by the type of electrical wiring, plumbing, wood stove, and age of oil tank. Properties with "knob & tube" wiring will only be insured upon the agreement that it will be removed shortly after the policy commences, and even this concession might not be available from all insurrers. Some home owners will simply need to remove the "knob & tube" prior to listing.
Wood-burning stoves have also been receiving more scrutiny from insurers. Typically an insurer will have a woodstove questionaire to be filled out when you obtain your policy. Expect to be asked questions such as the make and model of stove, has it been CSA approved and what type of liner has been installed in the chimney.
Many times, these items are pointed out during a building inspection. It is important that any question of insurability is resolved prior to removing conditions as often it will be the Seller's responsibility to address the offending items. It is also much smoother at completion if insurability has been addressed. In addition to the buyer simply obtaining insurance, it's critical that a a buyer take into the approximate cost for coverage will be satisfactory for the Buyer. Otherwise mortgage funds may be delayed if there is any question of insurance or lack thereof.
The insurers will find it helpful to have a copy of the property MLS information from your Realtor and will ask if any upgrades have been made. They may even have a list of questions to be answered. This will give you a head start for the transition to your new home.