May 4th - 2003

Is home insurance harder to get?

Acquiring home insurance is usually one of the last steps a buyer takes in the home buying process.

Acquiring home insurance is usually one of the last steps a buyer takes in the home buying process. But that practice may change in the future as home insurance becomes more expensive and less accessible to some buyers.

Although the Insurance Bureau of Canada (IBC) says Canadians currently have no worries about securing homeowner’s insurance, they do agree there’s been an upward trend in homeowner’s insurance rates over the past few years. Issues such as underground oil tanks and knob and tube wiring have made it difficult for some homeowners in Ontario to obtain insurance. The IBC also admits that very often what’s happening south of the border impacts Canada a few years later.

The National Association of REALTORS and the California Association of REALTORS have made what they refer to as the “insurance crisis” a top priority. According to the March 2003 issue of Real Estate Broker’s Insider, some Realtors have had deals fall through and others delayed due to either the inability to secure a policy or the high premiums. “The crunch has hit some areas harder than others, based on an area’s propensity to national disasters and the regulatory climate in each state, the article reads.

“Texas, for instance, has the most expensive homeowner’s insurance in the nation, which insurers blame on the Lone Star State’s susceptibility to natural disasters such as hurricanes, tornadoes, and hail, not to mention a flood of toxic mold claims that insurers say have added $444 to the price of the typical policy.”

In the U.S., insurers rely on information in the CLUE (Comprehensive Loss Underwriting Exchange) database to track a home’s claims history. Some Realtors will ask sellers to provide a CLUE report early in the selling process and if there’s been any type of water claim for example, they will start looking for an insurer right away. Many Realtors in the U.S. are sure to mention insurance challenges to potential buyers very early in the transaction.

Although Canada does not have the CLUE database, there is a “HITS” (Home Insurance claims Tracking Service) database for insurance underwriters maintained by CGI (formerly IAO automated information services).

HITS does not provide “insurability” information, but does maintain a database of approximately 95 per cent of all insurance claims in Canada. Under privacy law, the information is only made available to insurance company underwriters with consent from the consumer.

Currently, the information is not available to Realtors, but insurance underwriters use the information from the HITS report along with several other indicators to determine someone’s “insurability.”

While Canada isn’t experiencing an insurance crisis like the one in the U.S., issues like mold, wiring, oil tanks, and grow houses can play havoc with a real estate deal and make obtaining home insurance difficult and expensive.

To protect yourself and your clients, Realtors should insist that the sellers complete an SPIS (Sellers Property Information Statement) and if there is any doubt about the house’s insurability, include a condition regarding the buyer being able to obtain home insurance.

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For more information contact

Ontario Real Estate Association

Jean-Adrien Delicano

Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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