Contents and Liability Insurance
a) Fire/Contents Insurance in Non-Condo Purchases
House insurance has to be arranged by the purchaser with the mortgage lender named as a loss payee in the policy. The house insurance policy should be of the full guaranteed replacement value of the property just prior to the closing. The policy should be made effective on the closing day.
In all such cases, insurance company agent usually sends an insurance binder letter to the law firm dealing on your behalf confirming that the coverage is arranged for guaranteed replacement cost. It also contains the mortgage company’s name and address and is sent to your real estate lawyer before completion of the non-condominium house purchase.
b) Fire Insurance for Condominium Purchases
Usually, insurance for the complete condominium is taken by the condo corporation. This includes all the original structure provided by the builder and does not include any improvements or upgrades done on any later dates.
Certain exceptions are present for vacant land condominiums where insurance will be needed. In these circumstances, your real estate lawyer can review and advise on the need to purchase the insurance.
It is advisable to take insurance for the contents and liability of your individual condo unit at the time of purchasing the condominium.
For resale property purchases, such policy needs to be effective as of the closing date. In case of new condo purchases directly from the builder, the occupancy date will be the effective date of the policy.
It is advisable to make sure:
- You should take a condominium unit owner’s policy (not a tenant’s policy)
- Condo unit insurance should include payment for deductibles owed by the unit owner as per the insurance policy of the condo corporation
In cases where you are selling
Make sure that your property insurance is legally valid till the complete transaction has taken place and is closed. Cancel the policy only after the transaction is closed.
Though you can advise the insurance company of the upcoming sale of your property but cancel the policy only upon closing of the deal. Never inform your insurance broker to cancel the insurance policy prior to closing or on the closing date. You will certainly never want to be in a situation where you are the legal owner of a property which has cancelled fire insurance.
For any property that will be vacant for a period exceeding 30 days, it is essential to get a special insurance binder from your insurance agent.