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It’s no news that there have been profound and unprecedented changes in the insurance industry over recent months. One good bit of news is that most insurance companies in Ontario will still provide coverage for a home with an oil tank in the basement, if it is less than 20 years old and has been inspected by a TSSA approved inspector. Beyond 20 years of age it becomes difficult to obtain coverage. We have also learned that very few insurers in Ontario are willing to provide coverage for homes with galvanized plumbing or "knob & tube" wiring, and new coverge is all but nonexistent for a house with a 60-amp input service. What is surprising and somewhat alarming, are recent additions to the list of perceived risks, including aluminum wiring, cast iron drains and any heating system in excess of 25 years - to name only a few of the items which could place a house in the "substandard" category. Genmark Insurance (1-416-482-2089) provides coverage across Ontario, for homes with knob & tube wiring and galvanized plumbing. Coverage for knob & tube wiring is dependent upon producing a safety certificate issued by the Electrical Safety Authority (ESA). Coverage is available for homes with galvanized plumbing provided there have been no previous claims, the piping has been inspected and any necessary repairs are made. Some companies are reluctant to provide coverage for older homes even when the recommended upgrades and renovations are completed. Depending upon the insurer and the number of risks present in the home, the annual premium rates for "hard-to-place" coverage may be anywhere from 2 to 4-times the normal rate.
The Insurance Bureau of Canada www.ibc.ca from time-to-time issues guidelines to the industry, or you can visit www.insurance-canada.ca for further information. A list of brokers in Ontario can be found at www.ibao.com. Insurance Brokers can help both vendors and purchasers of homes understand the problems they might face. Realtors should encourage their clients to talk to their Insurance Broker early on in the process so they don't have to scramble at the last moment.
"Catch-22" Evidence of insurance coverage, or the ability to obtain insurance, may be required to close a mortgage; which is typically required to close most sales. Given that ownership is the ticket to making the necessary repairs, and given that prospective purchaser does not yet own the house, they cannot make the repairs. Or to put it simply, if the repairs aren't made, they may not be able to buy the house. It becomes evident that the Vendor of a property may, in all likelihood, be the one who has to call the plumber or the electrician, or whoever, to correct any situation which may give rise to denial of any new insurance application.
The Bottom Line: Vendors need to know that in light of the current situation, they may not be able to sell their home until certain upgrades are made, even if there's nothing apparently wrong with the item in question. All systems and components of a house will wear out eventually but fortunately they don't all wear out at the same time. A house will fall into a pattern of rotational maintenance and upgrades, typically costing about 1% of the value of the house annually. One year you buy a new furnace and a few years later you might upgrade some windows. There are some "givens" when looking at a house... at twelve to fifteen years it might need new shingles, beyond 60 years it probably needs some new plumbing.
Click here for a list of replacement items for a typical home and their average costs.
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