I just want to buy a home, why does everyone just keep talking about insurance?
Buying a home can be confusing enough. You probably hear the word insurance as often as you hear the word mortgage in the early stages of buying your home. It’s important to slow down these conversations and confirm exactly what insurance is being discussed because there are a number of them and they all do something very different.
Let’s explore the 4 most common insurances that come up when buying a home:
Home Owners Insurance
This is an insurance policy that protects your home and assets. You, mortgage lender, will require you to obtain, at a minimum, fire insurance. Please make sure you consider getting more than just the minimum.
An insurance premium added to your mortgage loan that protects the lender in the event you default on your mortgage. The only way out of this one is with 20% down or more. You’ll most commonly hear this called CMHC insurance. For a more in-depth review on this premium, read Questions every first time home buyer should be asking Pt 1 Down Payment & CMHC
Mortgage Life Insurance
This is a debt reduction policy that pays your mortgage in the event something should happen to you. No funds are given to a beneficiary, this could pay your mortgage in full. It is optional. I always recommend that if you do not currently have adequate life insurance, this is something you should consider in the meantime. You’ll have the option of enrolling in life, critical illness, and disability coverage.
A policy that pays out to a beneficiary(ies) in the event something should happen to you. There are various products available. I recommend you speak with a licensed professional in this area to discuss the pros and cons of these products.
Take control of the conversation. If ever you are having trouble following the conversation or what id being discussed, ask them to slow down and explain things differently. This is one of the largest purchases of your life, it is important you fully understand all the options available to you, and what is required of you.