When buying a new property, we readily consider the down payment, notary fees, welcome tax and inspection costs, but we often forget the expenses related to insurance. As a new home buyer, however, you will be faced with several different types of insurance – some that are mandatory and others strongly recommended. Here is a list of insurance policies that you might have to include in your purchase budget.

Insurance related to the mortgage

Mortgage loan insurance. If your down-payment is less than 20%, your financial institution might require you to take out mortgage loan insurance. Available through the Canadian Mortgage and Housing Corporation (CMHC), this insurance can be paid in an annual lump sum or divided evenly into your monthly mortgage payments. For more detail, it is worth consulting the CMHC site.

http://www.cmhc-schl.gc.ca/en/co/moloin/index.cfm

Mortgage life insurance. If you are buying with a spouse or a friend, or if you have dependants, it is strongly recommended that you add life insurance to your mortgage loan. If you die, this insurance will cover your remaining mortgage, either entirely or in part. It is important to note that you are not required to use the same financial institution for life insurance and your mortgage loan.

Invalidity insurance. Invalidity insurance is meant to protect you in the case where illness or a serious accident prevents you from meeting your payment commitments. Buyer beware! Shop carefully for this one. Invalidity insurance policies are often very stringent – long delays before receiving reimbursement, limited and detailed definition of “serious illness”, among other disadvantages.

Insurance related to co-ownership

As the owner of a condominium, you will be covered by two insurance policies: the insurance taken out by the co-ownership syndicate (or condo corporation) and personal home insurance for your own unit.

Condominium insurance covers the whole building, including the foundation, the roof, the outdoor siding, and the shared spaces, such as staircases, terraces, pool and lobby, as well as the inside of the condo units themselves. It does not however cover your furniture or personal property, or any modifications you make to your unit. Often the co-ownership syndicate will require new owners to pay the entire first-year insurance payment when they purchase their unit.

Personal insurance. In order to protect your personal possessions, your furniture, and any modifications you have made to your unit – new kitchen cabinets, flooring, etc – as well as covering you for third-person liability, you will need to take out a personal insurance policy. This will also protect you in the event you are responsible for damage to the condominium.

Insuring a single-family house

Gone is the life of a renter! You are now ready to take on home owner insurance. You can expect this one to be a little more expensive because it offers broader coverage, including the roof, the foundation, the garage and the property. Although home owner insurance is not required by law, it will be required by your financial institution if you wish to take out a mortgage loan.

As you can see, insurance policies are an important element as you plan your budget to purchase a new property. They represent additional monthly or annual expenses that you will want to consider. In order to make an informed decision and ensure the best insurance policy at the best price, do not hesitate to consult a reliable insurance broker.