Determining How Much Home Insurance to Obtain
Thursday, May 23, 2013
Real estate experts agree that whether someone is purchasing a home in Alberta or virtually anywhere else in the country, a residence is likely the most significant financial investment that a person will make in the course of their lifetime. Seeing as that's the case, it makes sense that they provide themselves with the appropriate Alberta home insurance coverage.
To help homeowners determine how much coverage they need, the Insurance Bureau of Canada recently produced a downloadable brochure that new or aspiring homeowners can consult.
As a general rule, mortgage companies require that borrowers purchase home insurance before a loan is approved. While those who are borrowing may well understand this, they're often less certain about how much coverage they should buy, as this is an answer that tends to vary depending on a family's financial circumstances as well as the property that they're insuring.
Find out everything there is to know about the home
IBC notes that the better homeowners know their home, the more accurately insurance professionals will be able to determine the appropriate coverage amount. For instance, the year when a home was built, its total square footage, the number of stories it has and the style of house are all factors traditionally taken into account. What the foundation is made up is another component that helps insurers assess coverage needs, such as if poured concrete was used.
The physical makeup of a home is perhaps the best way to figure out insurance coverage is sufficient. Other factors insurers traditionally look at - which, in so doing, homeowners should be aware of - include what the roof is made of, the quality of finish on floors, the wall finish on the exterior and interior and how tall the walls are on the inside as well, IBC notes.
Replacement cost and resale value aren't the same thing
Once an insurer determines how much a property should be insured for, it may come as a surprise that the total is more than the property's resale value. But this is actually quite common, as what a property is insured for is rarely affected by what it's valued at on the open market. That's because insurers take into consideration the replacement cost of building a home. In other words, should the home be destroyed, how much would it cost to build from scratch. Updated building codes, more expensive materials and labor expenses are three of many other variables that help explain why resale value and replacement cost differ, IBC points out.
Home insurance is a particularly relevant topic for Albertans, as the province is one of the fastest growing provinces in the country. According to a recent report from ATB Financial, the region of Canada that's growing by leaps and bounds in the Prairies, led by Alberta.
"According to the latest population estimates from Statistics Canada, our province's population stood at 3.9 million as of January 1, 2013," said Todd Hirsch, ATB Financial senior economist. "Ontario is still by far the largest province in the country with 13.5 million. Quebec and British Columbia follow in second and third."
He added that on the heels of these provinces is Alberta, as population rates in the province jumped by 3 percent between January 2012 and 2013, and that if growth trends continue on the course that they're on now, in less than 10 years, Alberta will be the third-largest province in the country.