As a Kelowna resident, fire in the Okanagan is not an unfamiliar sight, however, what we experienced this year has had a direct impact on many friends, family, clients, and our community. I would be remiss if I didn’t take the opportunity to thank our firefighters, first responders, and so so many selfless members of our community who came together during a devastating event to help others.

Insurance is one of those topics that can get confusing really quickly when it comes to a mortgage. There is mortgage insurance, which protects the lender in case of a borrower defaulting, fire insurance, content insurance, term policies, and the list goes on and on. With that in mind, lets talk about fire insurance, when it’s required, and why, even if it’s optional, you should have your home protected.

When you take out a mortgage in Canada, the lender is going to want to make sure that their asset is protected, the asset being your home. While it’s technically yours, your home is what they have as collateral for lending you the money to purchase it, so lenders have an interest in making sure that it is covered by a fire insurance policy. What this means, is that when you take out a mortgage, they will make it a condition of lending you the money, that you will take out a fire insurance policy. If you are buying in a strata, the strata will have a fire policy for the building, you will still want to consult with an insurance broker around coverage for your possessions. They will verify you have the policy in place through your lawyer or notary when you close on the purchase of a home.

So how do you actually get a policy? It’s pretty simple, you talk to an insurance broker, they will discuss all your options, find the right policy that meets your needs, and ensure it is put in place, effective your closing date. While we, as mortgage brokers can tell you that you need fire insurance, we cannot advise you on any particulars of a policy, that falls outside the scope of our expertise.

So let’s assume for a second you are buying your house in cash, no mortgage (I know I know, not a lot of people are in a position to but let’s discuss anyways). You don’t have a specific requirement from a lender telling you that you need fire insurance, so why not save yourself some money and not get the policy? Well, in the event that a fire does occur, and you lose your home, you have no recourse. You essentially have lost your home and the money you paid for it. For a lot of people, their home is their single biggest asset and where the bulk of their money and net worth are tied up, to lose that would be a devastating loss. So while it sounds tempting to save the extra money, especially in our current economic time, it’s not worth the risk. As we see more and more fires every year in BC, part of the deal for living here, we know that more fires = more risk. Don’t take the chance!