Insurance Requirements When Purchasing a Property with a Mortgage
When contracting a mortgage loan for the purchase of your real estate property, your financial institution has strict requirements regarding the damage insurance you are required to obtain.
One of the documents you are required to provide to your Notary is your proof of damage insurance. Your Notary is obliged by your financial institution to obtain, verify, and keep a record of your proof of damage insurance, and will not be able to close your transaction without it.
The mortgage instructions sent by your financial institution to your Notary include the required details which must appear on your proof of insurance. Therefore, the Notary is unable to confirm the amounts or other details needed until they have received your mortgage instructions.
The criteria which must appear on your proof of insurance are as follows:
The effective date of the policy, which must be your closing date or prior;
The exact address of the property being purchased;
The full names of all purchasers;
The amount of the insurance; and
The exact name and address of the financial institution.
If you are purchasing a single-family home or a multiplex, certain requirements, such as the insured amount, will vary depending on your financial institution. All financial institutions accept (most require) a “full replacement cost” insurance. Very few financial institutions accept that you insure only for the amount of the registered mortgage.
If you are purchasing a condominium, in addition to contracting insurance for your private portion, you are, in most cases, required to add a civil liability insurance of 2 million dollars to your policy.
To ensure a smooth transaction, you should be prepared to send the proof of insurance to your Notary at least a few days prior to your transaction so that it can be verified and validated.