The right home insurance policy will protect your home and belongings against loss or damage, and cover you in case someone gets hurt on your property. Whether you own a vacation home or investment property, here are five key things you should know about insuring your U.S. real estate.
1) Understand Where Your Canadian Home Insurance Leaves Off
Insurance is a highly regulated industry, and each provider must be regulated to do business in a given province, territory or state. While there are some insurance providers that offer services globally, it’s always good to determine if your current insurance provider is qualified to operate south of the border and find out if they can cover what you own in the U.S.
Keep in mind, your current Canadian policy will likely not extend to belongings or property owned south of the border. Whether you are able to stick with your current provider or opt for a different insurance company, it’s important that you purchase a specific policy to fully cover your U.S. assets.
2) Know What’s Required
There are a few types of home insurance typically required in the U.S.: Homeowner’s Insurance and Flood Insurance. And if you own a property in Florida, Windstorm Insurance is generally required to get a mortgage.
Homeowner’s insurance will cover you in case of damage caused by fire, storms, theft or most other natural disasters. However, U.S. homeowner’s insurance typically doesn’t cover damages caused by flooding, wind or earthquakes.
If your U.S. home is located in an officially recognized high-risk flood zone, U.S. law requires you to have separate flood insurance. To help you determine this fact, FEMA (Federal Emergency Management Agency ) offers an online flood map service center. If your U.S. property is located in an area prone to flooding, you can take advantage of the National Flood Insurance Program (NFIP), which provides affordable insurance to homeowners.
In prime locations for hurricanes, homeowners need to secure extra insurance to protect against high winds and storms. What is commonly called hurricane insurance, coverage is in fact a combination of windstorm and flood insurance. Windstorm insurance is a separate policy sold in areas like Florida when homeowners insurance does not cover wind damage, and it covers wind-related damage as well as hail.
Looking to purchase a property in the U.S.? Did you know that Canadians can apply to get financing for a U.S. home purchase using their Canadian credit history?
3) Figure out What’s Right for You
There are a number of options when it comes to customizing your home insurance policy in the U.S. The level of insurance you choose – and the options you add to your coverage – will depend on the type of property you own, the value of your belongings, and where your home is located.
Here are some coverage options worth considering:
- An earthquake policy is a smart purchase if your home is in a region prone to earthquakes.
- Replacement Cost Coverage provides coverage to rebuild your home if it’s destroyed. If you have owned your property for a while (and are concerned it may have depreciated in value), Replacement Cost Coverage offers more protection versus the standard-issue Actual Cash Value coverage.
- Water Backup Coverage protects your home should your sewers or drains back up, or your sump pump breaks.
- Insurance for other structures is important if you have property that’s not attached to your home – such as a gazebo, shed, garage or pool enclosure.
- Umbrella liability insurance provides coverage over and above your homeowners’ insurance policy and protects you in case someone gets hurt on your property and files a lawsuit against you.
- Separate valuables insurance is a must if you have belongings such as jewelry, artwork, memorabilia, antiques or other collectibles, as they may not be fully covered under your standard policy.
4) Get up to Speed on Changes in Your State
Insurance is governed by each individual state, and changes to rules and regulations occur on a state level. You’ll want to stay up to date on what’s going on in your state as changes may affect your level of coverage and/or the price you pay for insurance.
To make sure your insurance offers full coverage at all times, here are some steps you can take:
- If you have a policy renewing in the next 12 months, check with your insurance provider or agent if there are any policy coverage or deductible changes.
- Compare rates and options with other companies if your coverage is changing.
- Understand the impact of your deductible. While some deductibles are fixed dollar amounts, some are calculated as a percentage of your home’s value.
5) Know What Happens If You Don’t Have Insurance
Your U.S. mortgage provider must receive yearly verification that your home is covered, since policies are generally good for 12 months. If you’re not able to provide evidence of adequate coverage, your lender will purchase what is commonly called forced place insurance in order to protect their financial interest in the property.
This type of policy is likely more expensive than a policy you would purchase yourself, and it might not offer full coverage. For instance, forced place insurance doesn’t typically cover belongings or personal liability.
Whether you live in your U.S. home full time, over the winter, or you rent it out to others, having the right insurance coverage will protect your investment and your financial security should the unexpected happen. It will also give you valuable peace of mind, so you can enjoy your U.S. property stress-free.
Protect yourself against the unexpected by getting the right insurance coverage when travelling to the U.S. Take a look at our guide Four Steps to Peace of Mind: Get the Right Insurance When Travelling to the U.S.
1 – National Association of Realtors International Study, July 2017
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
