If you’re a home buyer concerned about obtaining insurance coverage amidst wildfire risks, it’s important to understand the nuances of insurance policies and take proactive steps to safeguard your investment.
The Difference Between Quotes and Bound Policies
When you receive a quote from an insurance provider, it’s an estimated cost for a specific policy. However, binding an insurance policy means that the coverage becomes effective as agreed upon. Remember, a quote is just an estimation and doesn’t guarantee policy binding.
Navigating Wildfire Season Challenges
During wildfire season, insurance companies often impose limitations on binding policies for properties within a certain radius, typically around 50 km, of active wildfires. This scenario can create significant challenges, potentially hindering the progress of your real estate transaction.
Three Essential Steps:
Include Insurance Clauses in your Offer
Work with your REALTOR® to insert clauses into your offer that acknowledge insurance coverage as a condition of the offer. For example, you could include a clause that extends the completion date if insurance becomes unavailable due to wildfires in proximity. Also, to ensure continued protection in case you face challenges in obtaining insurance, include a clause for the seller to maintain home insurance until after closing.
Seek Early Quotes
Regardless of whether the property is near a wildfire zone or not, it’s wise to request insurance quotes as soon as your offer is accepted. This provides you with the opportunity to explore various insurance providers, especially if some decline to offer quotes due to nearby wildfires. If suitable insurance cannot be found, and you don’t secure insurance coverage by the completion date, your mortgage lender may withhold mortgage funding. This could delay the transfer of property or trigger a failed sale, leaving you in breach of contract and jeopardizing your deposit.
Confirm Binding Policies
Remember that a quote doesn’t guarantee policy binding. Wildfires can emerge between the time of obtaining a quote and binding the policy. When you receive a quote, inquire about the insurer’s policy for such situations. Some insurers might honor binding based on offer and acceptance of the quote prior to the wildfire’s onset.
Key Takeaways
In conclusion, securing insurance coverage during wildfire season requires careful planning and awareness of potential challenges. By staying informed about wildfires, being proactive, and seeking advice from your realtor and insurance professionals early, you can navigate these challenges during wildfire season in making your offer to purchase a home and removing your subjects..
This general insurance information and, while it’s believed to be accurate, things change so please check with insurance providers for information specific to your region and property needs.
