Congratulations if you are going from renting to owning your home! The process is exciting, but it can also be overwhelming. When it comes to home insurance requirements, here are some tips to help you better understand and simplify the process.
Renters Insurance Explained
You may already have renters insurance in your current situation. The purpose of renters insurance is to cover the replacement of your belongings if they are stolen or damaged. As a renter, you are only responsible for insuring the contents in the home as well as covering your liability should you be found responsible for damage to the home.
The owner of the home is responsible to insure the structure of the home if it is damaged or destroyed. If you are the cause for damage to the structure, then the liability portion of your rental insurance will help cover the repair costs. The claims are typically a much smaller dollar value than claims from a homeowner, so renters insurance is much more affordable and can be as minimal as $30 per month.
Homeowners Insurance Explained
The purpose of homeowners insurance is to cover the building, structures on the property, and the contents inside. Homeowners insurance is much more expensive than renters insurance because the largest insurable factor is the cost to re-build the home. Your Insurance agent should evaluate the re-build value of the home, taking into account the year it was built, materials used, appliances included and the safety of the original building materials. The size of the home is a factor because the larger the home, the more it will cost to re-build and the more valuables it can hold inside.
If the actual value of the home is $200,000, but the re-build cost is estimated at $350,000, you will want your insurance policy to be based on the $350,000. The liability portion of homeowners insurance also covers you in the event that a visitor to the property gets hurt and you are found legally negligent.
If you are purchasing a condominium, the strata corporation covers insuring the structure, but you will need to insure your contents and liability (similar to renters insurance). Read the strata policy to clarify their coverage before you purchase insurance, as you may be liable to pay the deductible on that policy in the event of a claim; this could be anywhere in the range of $5,000 to $25,000, so you would want your homeowners policy to cover this amount.
Landlord Insurance Explained
Do you plan to rent out your new home or a suite within it? If so, you can obtain landlord insurance, which protects items used to service the property, damages resulting to the property through actions of the tenant, and liability if a renter was to get hurt and the landlord or property is found legally responsible.
Neither landlord nor homeowners insurance will typically protect personal items of the tenant. As a condition of the lease, you could require the renter to purchase renters insurance. If you are renting the property full-time, you will want a landlord policy.
Continue your transformation from renter to owner by switching your insurance policy. The Auxilium Team is happy to provide you with a referral to our trusted partners for a consultation and quote.