Facts about Insurance
What’s the difference between home insurance, mortgage loan insurance and title insurance?
Home Insurance
If you have a mortgage on your home, your bank will require you to have proper home insurance to protect their interest. If you are purchasing a home, most offers will have a clause making the offer conditional upon the buyer arranging insurance for the property. Insurance companies will need to know age of home, type of plumbing and electrical, type of roof, square footage, if there are any wood fireplaces, nearest fire hydrant, etc. Insurance companies have the choice not to offer insurance; knob & tube wiring and wood fireplaces are just a couple to issues that might be of concern. Do you qualify for a discount – alarm systems, seniors or combining 2 or more policies with the same company may qualify you for discounts so it is best to shop around.
Mortgage Loan Insurance
This type of insurance is mandatory by lenders when homebuyers make a down payment of less than 20% of the purchase price. This protects the interests of the lenders. It also helps homebuyers purchase a home with as little as 5% down. The cost to homebuyers will be a percentage of the mortgage. This payment can be paid in one lump sum or it can be added to your mortgage and included in your monthly payments. Mortgage loan insurance (mandatory) and mortgage life insurance (optional) are two different things. Mortgage loan insurance protects the lender if you default on your payment. Facts Mortgage life insurance pays off your mortgage in the event of your death. Two companies that offer mortgage loan insurance are Genworth Financial and Canada Mortgage & Housing Company (CMHC).
Title Insurance
“Title” means legal ownership of property. Title insurance guarantees title. This type of insurance is not mandatory in Ontario. It is best to discuss with your lawyer to find out how title insurance can protect you. Title insurance can cover things such as issues that prevent you from having clear ownership, unpaid debts from the previous owner, encroachment issues, errors in surveys and public records, title fraud, etc. Title insurance is a one time fee at the time of purchase. The cost varies depending on the value of your property. It sometimes can replace the need for a survey. Once you get all the facts from your lawyer you make an informed decision as to whether or not to purchase it.
In today’s age it seems we have insurance for everything! It may seem excessive until the day you actually need it.