When you’re applying for insurance, it’s extremely important to answer all questions as honestly as you can. These are the numbers that stand between you and a policy that works exactly the way you want it to. However, many Canadians still don’t know the answer to these three basic questions when they’re applying for home insurance.
Today, we’re going to walk through each question, why it’s important, and how to figure out the answer for your own home.
“What’s the replacement cost of your home?”
Many homeowners see this question, shrug, and just put down the current or forecasted price of their home. However, if you don’t know the actual replacement cost – that is, how much it would cost you to rebuild your home if it was completely destroyed – and you put down the house price, you’re risking underinsuring yourself in the event of an actual emergency.
Let’s say that you bought your home for $200,000, and that’s what you put down as your replacement cost. Let’s also assume that you select a home insurance plan that covers you up to $250,000. It’s $50,000 more than what you paid, so you should be fine, right? Not necessarily. If your home is destroyed and you end up having to pay $300,000 to rebuild it, then your policy won’t cover you for the last $50,000, which means it’ll have to come out of your pocket instead.
To figure out the exact replacement cost of your home, you have several options.
- You can hire a professional appraiser to come and assess your property.
- Find and use an online calculator service.
- Do your own rough estimate.
If you opt for the DIY method, you’ll want to look up what the average construction cost per square foot is in your area. Multiply that by the square footage of your home, and you’ll have a rough estimate of your replacement cost.
“What year was your property built?”
This question is so your insurance provider can get a better idea of what risks your property faces. A mid-century home may have everything you’ve ever dreamed of, but it probably also has some issues that newer homes won’t face for many years. For example, the electrical wiring may be old and need to be replaced in the near future, or the structural beams may eventually need reinforcement.
As with the first question, this one is designed to make sure that your insurance policy covers what you need it to. If you’re not sure how old your house is, it’s time to do some sleuthing.
- Start by digging through the home’s tax records. If they weren’t included with the sale or transfer of the home for some reason, you’ll be able to find them at your city’s tax office or with your county clerk.
- Check for building permits. These will tell you what was done to the home and when.
- When in doubt, go to the library. If you can’t find anything elsewhere, your local library will likely have a record of old newspapers, which may contain real estate listings or other information relevant to your house’s location.
“What is the square footage of your home?”
Knowing the square footage of your house is essential to get the right insurance rate. The reason? Different provinces have different construction costs.
For example, in Montreal, one square foot might cost $160 to build. If that exact same square foot of construction were to be built in Vancouver, the cost could jump up to $230. That means that a 1,400 sq ft house would cost either $224,000 or $322,000, depending on where it was built.
You don’t want to pay more than you have to, but you also don’t want to have to pay out of pocket if your home had to be rebuilt. This is why being able to provide an accurate answer to the question of square footage is so important.
If you’re not sure how big your home is, figuring it out is a snap. Measure the room’s length and width, then multiply the two numbers together. The result is the room’s square footage. Repeat the process for each room in your home. Add the totals together to figure out the rough estimate of your square footage.
For a more precise measurement, add about six inches to each wall measurement. Many contractors and architects will calculate square footage based on the distance between exterior walls, rather than the living space inside.
Got More Questions About Your House Insurance?
Your insurance policy is your defense against natural disasters, robberies, vandalism, injury liability, and living costs if your home is destroyed. As such, it’s important to make sure the policy you get is the one that will provide the protection you need. There are many different plans out there, but you don’t have to examine each one.
An insurance broker will be able to provide you with unbiased, experienced advice, allowing you to make an informed decision for yourself and your family. Will Marshall has been providing residents of Barrie and Orillia with expert recommendations since 1983, and we’re proud to offer our clients unparalleled, personalized service.