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-- PAGE 12 = APRIL 1971 HOME IMPROVEMENT SUPPLEMENT What you must know about insurance you will REPRINTED FROM The Financial Post December 26, 1970 By Robert Catherwood An essential first step after acquiring property is to insure it. If you have a mortgage, the mortgage lender will require you to carry fire in- surance to at least cover the amount of the mortgage. But you should not limit yourself to just protecting the mortgagee's interest. The amount of the mort- gage may be significantly less than the value of the property and it is just as important to protect your own interest, too. In deciding on how much fire insurance to carry, don't overlook the implica- tions of the optional settle- ment clause contained in all policies. This clause enables you to have losses settled with no reduction for de- preciation if you are carry- ing insurance equal to at least 80% of the replace- ment cost of the building. Replacement cost is the cost of putting up a build- This is the 10th article in a new FP series on the risks and rewards in real estate in- vestment. On completion of the series, all articles will be reprinted in book form. Orders for this new book, Real Estate for Profit, are being accepted now at $3 per copy. Write to: The Financial Post, 481 Uni- versity Ave., Toronto 101. ing with "material of like kind and quality." With an older house, es- pecially, it is not easy to determine the replacement cost. Contracting or engi- neering firms can provide appraisals, but normally it should not be necessary to go to this expense. As a rule of thumb, you can take the market value require of the property and sub- tract an amount for the cost of the lot. The resulting fig- ure should be close to the replacement cost. Remember, of course, that you need not limit yourself to 80% of the re- placement cost -- if the house burns to the ground, you will be a lot happier if you had it insured for 100% of the replacement cost. Fire insurance policies usually cover loss or dam- age caused by fire or light- ning, explosion, falling ob- jects, glass breakage, im- pact by aircraft or land ve- hicle, riot, rupture of a heating, plumbing or air- conditioning system or es- cape of water from such a system or from a public water main, smoke, vandal- ism or malicious acts, theft, and windstorm or hail. Some hazards -- such as glass breakage, rupture of heating and other systems, water escape and wind- storm or hail -- usually are subject to a $50 deductible on each claim. If the loss is more than' $500, the de- ductible may not apply. Water escape coverage does not apply if you are away from your house for more than four consecutive days (96 hours) and have not taken precautions to prevent freezing of pipes. Recognized precautions in- clude draining the water system, or arranging for someone to come into the- house daily to ensure that the heat is on. There is no coverage for any type of damage if the house is vacant for more than 30 consecutive days. But "vacant" does not in- clude situations in which the house is unoccupied while, for example, you are away on vacation. To be considered vacant, the fur- niture must be out. , Installed broadloom is considered part of the building if you own your house, part of the contents if you rent the house but own the broadloom. Awnings, storm and screen windows and doors and. air-conditioning sys- tems are also considered part of the building for in- surance purposes if you 'own your house. Most dwelling insurance is written on a package ba- sis with coverage for the building, contents and per- sonal liability all included under one contract -- usually called a homeown- ers policy. Don't overlook the im- portance of personal liabili- ty insurance. If you own property and someone is hurt, or their property damaged on or about your. premises, you can be sued. The basic policy limit of $25,000 applies if you are legally liable for injury or damage. This means the in- jured party would have to prove negligence on your part. But the policy also pro- vides for a voluntary pay- ment of $500 for medical bills incurred by an injured third party, and $250 for damage to his property, re- gardless of whether you are legally liable. If you own a condomini- um, there are some extra complications in providing property insurance. Insurers say there is no problem in providing con- tents and personal liability insurance. But the fact that exterior walls, corridors, balconies and other com- mon elements (FP, Dec. 5) are owned by all the own- ers together presents diffi~ culties. Many insurers take the view that the easiest solu- tion is to have the whole building insured under one policy in the name of the condominium corporation. When a unit is sold, a transfer and consent form is prepared, which becomes, in effect, an individual policy within the master policy. The premium can be allo- cated to each owner and in- cluded in his monthly maintenance charge. Along with insuring your property against physical damage and protecting yourself against lawsuits arising out of the ownership of your property; you can also insure the title to your property. Title insurance protects the insured against loss or damage arising out of de- fects in, or liens against, his title to the property. When you buy property, vour lawyer makes a search of all transactions affecting it to make su'e that you will "acquire good and clear title (FP, Oct. 24). Title in- surance does not replace the services of your lawyer. Indeed, title policies are is- sued only after reports on the title have been received by: the insurer from outside lawyers. A title insurance policy complements the services of your lawyer by protecting you against title defects of which you cannot expect your lawyer to be aware. Basically, your lawyer's certification of good title is based on his search of re- corded transactions and his check of certain specific unrecorded interests in the property, such as outstand- ing taxes and judgments. But these checks may leave other factors affecting Cont'd on Pg. 6 MORTGAGE MONEY $1000 to 10, 000 or more Up to 1b year amortization No hidden charges No bonus No finders fee Open from commencement for home purchase, renova- tions, debt consolidation, ® 8 ® 8 @ vacation or any other purpose C.A.C. REALTY LIMITED A Subsidiary of CANADIAN ACCEPTANCE CORPORATION LIMITED 22 Front Street Ph 887-2120 NIPIGON INSURANCE OFFICE See us for your insurance needs * HOUSE * FURNITURE * BOATS * CARS * LIABILITY JOHN COONEY - AGENT PH: 887-2836 NIPIGON, ONT