Rising Home Insurance Premiums got you Down?

Recently there has been a lot of concern about rising home insurance premiums. Some homeowner’s premiums have increased as much as 30 per cent, even without a claim being made in the previous year. Don’t get stuck with a ridiculous rate. Believe it or not, there are answers to the home insurance blues.

Why are rates on the rise?

Usually when insurance premium rates rise, it’s because a claim has recently been made. But rates have been rising in incidences where no claims have been made at all. Why is this happening?

Insurance companies blame wind and water damage due to climate change for the increases. According to a CBC news article, nationwide insurance payouts in 2009 totaled $5.3 billion, and more than half of those were claims paid out for extreme weather events. Of those, heavy rainfall claims were the most common.

Fire damage used to be the highest cost for insurance companies, said a spokesperson for the Insurance Bureau of Canada, but that all started to change approximately 10 years ago when water damage claims started to rise. With the recent events in Japan, the potentially high cost of climate change and natural disasters must be even more apparent to home insurers.

What can you do?

If you are seriously considering buying a new home, it’s always a good idea to have your insurance agent look over the home inspector’s report. The home that you’re interested in may be located in an area that is susceptible to water damage, or frequent claims may have been made in the past. Either way, these kinds of things can lead to higher rates. It’s always good to know what to expect before making a final decision. Here are a couple of tips to help minimize insurance claim risks:

Water damage costs can be high. To learn more about how water can damage your home and what it could cost your wallet, show your home inspection report to your insurer.

An accident may be just an accident, but you’re still liable. Look into how you can minimize potential hazards on your property. If your pavement is uneven it could potentially cause a nasty fall. Likewise, an unfenced pool can also be dangerous. The more hazards there are, the more your liability protection will cost you.

Install an alarm system. Not only will an alarm system give you and your family added protection, insurance companies often offer discounts on your home insurance premiums for alarm installation.

Home improvements can add to the overall value of your home. Make sure that your insurance policy adequately reflects the increased replacement coverage cost.

Location, location, location. Your home insurer can most likely tell you, based on where you live, whether or not you need additional coverage to make sure that you are adequately protected.

Looking for a new rate?

If you feel that your rate is unjustifiably high, there are some things you can do. Start by calling an insurance broker. Go online and get a quote from a company that deals directly with the public. Use social media utilities, such as Facebook or Twitter, to seek out better deals. Or, use a comparison website to get a quote.

Believe it or not, you are not obligated to stay with your current company and there are no rules to stop you from moving from one company to another. Unlike most phone companies, you cannot be penalized for leaving.

The only downside to frequently switching companies is that you may lose out on the client service that comes with customer loyalty, but sometimes that’s a small price to pay to potentially save hundreds of dollars.

The challenge in comparing costs is that home insurance coverage is not standardized. This doesn’t make for quick and easy comparisons. Here is a guide of a few things to pay attention to:

Liability: Coverage of $1-million is usually enough.

Coverage levels: The best policies cover all risks, except for a few situations. You can purchase separate ‘optional’ coverage for things like earthquakes, sewer back-up and furnace oil spills. Other policies will only cover risks that are specifically named. Be sure to read the fine print because some also include ‘uninsurable perils.’ For example, if you build your house on a flood plain, chances are you will have a flood at some point in the future. The damage caused by this flood is uninsurable.

Replacement costs: Just in case your home were to get leveled, you should always make sure that your policy doesn’t place a limit on the cost of rebuilding it.

Sewer back-up and water damage: Since this is the main reason for rate increases, it’s always a good idea to know just what you’re covered for. Sewer back-up is usually optional and paid for separately.

Insurance companies aren’t doing a heck of a lot to earn your loyalty, so there’s really nothing stopping you from shopping around. Don’t get stuck with a bad rate.

If you are uncertain about anything, an insurance expert is just a phone call away. Take advantage of their knowledge and expertise.

Melanie

Writer for RateSupermarket.ca

City or country living? It's all a matter of what you want

Taken from The Daily Gleaner

With New Brunswick's population almost evenly split between urban and rural dwellers, we posed this question to our Community Triple Take panelists: Which is better, living in the city, or living outside it?

1 OF 2

The Daily Gleaner/James West Photo

A vehicle passes through the Patrick Owens Bridge in Rusagonis Sunday afternoon. Rusagonis is a rural area between Fredericton and Oromocto.

***

Although I've spent time in communities outside cities, sometimes in very rural settings, I've never lived in one.

I've always been a city dweller. When I was younger, it was definitely my preference. Cities were where the action was, I thought. Realistically, it was true. Jobs and everything else were to be found there.

As I've become older, however, I've tired of cities. Part of my love of Fredericton is that it is smaller than other places I've lived. When I moved here, one of my neighbours said of the part of the city we live in that, "It's like living in the city and the country at the same time." I understand what he means by that, but I also know it's not really true.

Smaller communities, particularly when they're "out in the country," have a certain romantic quality, but only if you don't actually live there and never have.

I doubt it feels very romantic when dealing with the reality of power going out or waiting for snow to be cleared from the road.

Since I don't drive, living outside the city would be difficult, despite the benefits and how much I might like to.

By necessity, services are concentrated in cities and a big reason why I prefer Fredericton. Cities are where most people live. Economically and in many other ways, it's difficult to provide services to smaller areas to the same degree as cities. Just today I saw yet another article about trying to attract doctors to rural areas.

That has always been the drawback for me. How easy is it to get to a store (especially when I don't have a car)? With the work I do, how available and reliable is the Internet? The power? Transportation? What will I do about a doctor? Dentist? And so on ...

Most people drive and have vehicles, so many of my concerns would be less worrisome for them. What is more concerning, and should be to everyone, is how the migration of people from rural Canada to urban continues. Services depend on population size to pay for them. Without sufficient numbers of people, the tax base can't sustain them.

What happens to the history behind all of those smaller communities? Who will remember them, much less be able to find them on a map, when everyone leaves to live and work in cities?

I prefer Fredericton - partly for my own practical reasons (no car), partly because the truth is that cities are all I really know, and partly because, being smaller, Fredericton manages to retain something of the feel of smaller communities.

But I always wonder about what I may be missing.

Bill Wren is a writer, editor and social media guy at the Writelife.net blog. He abandoned Alberta for Fredericton just because he could.

***

Let me preface this with a statement: I am not against city living, it's just not for me, or my husband.

We both grew up in big cities. For someone like me who grew up in a really large city, one would think I would love living in the hustle and bustle of urban life. Nothing could be further from my reality.

I have had my full share of downtown, excitement, accessibility and convenience. I just want calm. I am done with car horns at 2 a.m. and roaming carloads of happiness.

I would just love a big old farmhouse on a hill, somewhere quiet and peaceful - something Victorian that had tons of rooms and lots of big windows. Oh, and a huge flower garden!

But my husband's idea of fun is not a farmhouse that needs a fortune in updates, so we have a happy medium in our nice little spot in New Maryland.

Yes, there are perks to living in the city, but I am a person who enjoys the predictable calm of tranquility. I like that once the morning commute is done, that I can depend on very little traffic and a lot of quiet. And the same goes for the evenings.

I would not move back to Vancouver even if I had a third kidney to sell in order to buy a small home an hour or two from anything we`d need. We have great neighbours here and those are hard to find!

Although city life here is entirely different than Toronto or Vancouver, it is still city life. Yes, the long and lovely trail along the river is tempting, but we have trails here too. There are gorgeous Victorian homes along the river for which I could cash in that third kidney, but I don't want to live so close to the congestion.

I like hearing the kids next door playing with our kids, and knowing that at any second they'll be in our yard, having a wonderful time.

I worry less about my kids' safety here, and they are free to roam around on their bikes, armed with my cell phone.

You may be getting the impression that I like peace and quiet. I'm not an old curmudgeon who barks at kids who play outside my window, unless they're my kids and I'm allowed.

It is the concrete and traffic lights, and the feeling of not having enough space to call my own. I am fully aware that many people do not have a choice as to where they live, and that some don't even have a place to live at all.

But given my choice, I choose somewhere that I can hear the hummingbirds hover in the bee balm.

Jennifer Major is a mother of four who lives in New Maryland.

***

The smallest place I ever lived had a population of about 300 and the largest, a population of nearly a million. Both ends of the spectrum have a lot to recommend them.

I spent my early years in rural Prince Edward Island in a village with one road, one church, a seed shop and a lot of cows and potatoes. It was a terrific place to grow up.

Back in the day, my mother shooed me outdoors first thing in the morning, leaving me to entertain myself.

As long as I returned to eat and sleep, no one cared about how I spent the intervening time. I had the great outdoors and my imagination; boredom was never a problem.

As an adult, I appreciate the fresh air, wildlife and solitude that come with country life. The romantic in me misses the starry skies and lazy summer afternoons, filled with the smell of flowers and the sound of fat bumble bees working their way through our gardens.

The crabby old realist in me says that municipal water and sewer services and plowed roads are worth their weight in gold.

Later in life, I came to experience real estate's equivalent of purgatory - the suburbs. They are safe, clean, affordable places to live, but when you drive through these vinyl-clad monocultures, you know you're not on the train to party town.

Other than tending to the house or mowing the lawn, there isn't much to do if you don't have kids. The country wasn't swinging with excitement, but it was serene without being dull. Suburbs are a serviceable middle ground between city and county, but they do lack soul.

After a long stretch on the outskirts, I finally badgered my spouse into trying urban living. We now live within walking distance of the library, galleries, UNB, the market, restaurants and most of our favourite independent shops.

We rarely use the car and have become much more physically active. Because we're out walking or working on the house, we've actually met our neighbours and have started to form some great friendships.

The only clear downside is our proximity to the bar district and our tiny yard.

Downtown Fredericton is big enough to offer many urban amenities without the traffic or crime associated with larger centres. That said, I hope that Fredericton will continue to grow. We can accommodate a lot more variety without losing the flavour of the community.

When it comes to urban versus rural, I'm currently on the side of urban. I won't rule out a future move to the country, but for now, the city suits our lifestyle and I'm happy to be at the heart of it.

Jen Petryshen is originally from P.E.I. but considers Fredericton her adopted home. She is studying at the University of New Brunswick.

CREA urges caution over more mortgage rule changes

STEVE LADURANTAYE — REAL ESTATE REPORTER

From Wednesday's Globe and Mail

Published Tuesday, Feb. 15, 2011 9:41AM EST

Last updated Tuesday, Feb. 15, 2011 9:43PM EST

The Canadian Real Estate Association has cautioned the federal government to stay out of the mortgage market until the effects of recent changes can be gauged, as it suggested buyers are racing to secure 35-year mortgages before they are banned in late March.

The federal government recently announced the end of insurable 35-year mortgages, leaving new buyers to take on amortization periods of 30 years or less. The move was made to help lower household debt in Canada, and makes it more expensive on a monthly basis to own a home.

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The changes have yet to come into effect; the government gave the industry 60 days to adapt after making the announcement in mid-January. That has given buyers a chance to secure longer mortgages ahead of the changes, CREA suggested, noting January sales increased by 4.5 per cent over December but were down 6.6 per cent compared to January, 2010.

“It will take some time before the longer-term impact of the latest mortgage regulations on the housing market can be known,” CREA president George Pahud said. “For that reason, further action shouldn’t be taken until the impact can be measured.”

Market watchers have expressed varying degrees of concern over the amortization changes, with some suggesting it will have a minimal effect even as it pushes some first-time buyers out of the market, and others suggesting price drops of up to 10 per cent as the market adjusts.

Finance Minister Jim Flaherty acknowledged the changes – which also included a reduction in the amount of equity homeowners could access to refinance their homes to 85 per cent of the property’s value – will be difficult to gauge.

“This is not arithmetically predictable, precisely,” Mr. Flaherty said when he made the changes. “We expect some moderation in the market. We’re taking these steps in any event now because of our concern about higher interest rates down the road.”

Rising interest rates are a deeper threat to the market, according to economists, because they would make monthly mortgage payments more expensive and push some Canadians – who took on too much cheap debt – out of their homes.

Still, CREA and Royal Bank have both raised their forecasts for the next two years suggesting that a balance between new listings and demand will temper any big moves in the broader market in either direction and that an improving economy will help Canadians service their loans.

Not everyone sees such a rosy picture. Capital Economics recently issued a cautious report suggesting higher interest rates could drive home prices down as much as 25 per cent over the next three years.

CREA said Tuesday the national average price in January was $343,675, little changed from the previous three months (the average price in December was $344,551). Resale listings more than doubled from December, however, and on a seasonally adjusted basis new listings rose 3.9 per cent for the largest monthly gain since March 2010.

There are still relatively few houses for sale, however, with the seasonally adjusted months of inventory – the amount of time it would take to sell all of the homes at the current rate of sales – at 5.5 months. That's the lowest level since March.

“Because sales activity and new supply rose in tandem in January, the national resale housing market remained balanced. The national sales-to-new listings ratio, a measure of market balance, stood at 55.7 per cent in January, 2011, which is little changed from the previous two months,” CREA stated.

Toronto-Dominion Bank economist Diana Petramala noted that a pickup in sales had been expected as buyers rush to beat new mortgage insurance rules that come into effect next month.

“The growth spurt will likely be short-lived, and come at the expense of future sales,” Ms. Petramala said. “As was the case the last time the federal government made mortgage insurance rules more restrictive, the strength in sales will likely be followed by a short period of weak housing data.”

Overall, she added, the housing market is still in a “well-balanced position with little price pressures on the horizon.”

Flaherty warns of even higher mortgage rates

The Canadian Press - http://www.ctv.ca/CTVNews/Canada/20110208/housing-market-110208/

Date: Tue. Feb. 8 2011 10:11 PM ET

OTTAWA — The Royal Bank of Canada became the third major Canadian bank to hike its five-year mortgage rate Tuesday, and Finance Minister Jim Flaherty is warning of further increases in the months ahead.

RBC joined TD Bank and CIBC in raising its posted rate for a five-year closed mortgage by one quarter of a percentage point to 5.44 per cent. The bank also raised a number of its other posted and special mortgage rates Tuesday.

Finance Minister Jim Flaherty said the hikes are "exactly what we expected."

Speaking outside the House of Commons Tuesday, Flaherty told reporters that with lending rates at historic lows, there is nowhere for the cost of borrowing to go but up.

"We're likely to see higher interest rates as we go forward because interest rates are still very low," Flaherty said.

The banks pin the hikes on a rebound in the stock market that has led to rising government bond yields, signs the economy is continuing its slow but sure recovery from the recession.

"It's gaining some traction and as the economy recovers, interest rates begin that process of returning to more normal levels," Derek Burleton, TD Bank deputy chief economist told CTV News.

While experts have predicted a cooling in the housing market after tighter mortgage rules come into effect in mid-March, a new report predicts that growing consumer confidence may offset the expected negative effects of higher interest rates.

The Canadian Real Estate Association released a revised forecast Tuesday for Canadian home sales in 2011, which the agency predicts will be higher than it first predicted last year.

Its new forecast estimates that 439,000 existing homes will be sold in 2011, down 1.6 per cent from 2010 but an improvement on the nine-pet-cent decline predicted in December.

And unlike some economists, who predict that home prices will level off, or drop sharply, as rates shoot up, the CREA predicts that the average home price will rise by 1.3 per cent in 2011 to $343,000. In its earlier forecast, the agency predicted that the national average home price would fall by 1.3 per cent compared to 2010, to $326,000.

"Even though mortgage interest rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity," said Gregory Klump, the CREA's chief economist. "Strengthening economic fundamentals will keep the housing market in balance, which will keep home prices stable."

With a report from CTV's John Vennavally-Rao

Rate hike could trigger housing collapse, economist warns

BY PAUL VIEIRA, FINANCIAL POST FEBRUARY 3, 2011

OTTAWA — The Bay Street consensus is that the Canadian housing market skirted the worst and managed a soft landing and homeowners are likely able to absorb higher mortgage payments once interest rates head upward.

But one analyst warned Thursday that people are overlooking a key risk that threatens to push down housing prices by as much as 25% over the next several years: subdued wage growth in a low-inflation environment.

That mix could make mortgage payments increasingly onerous for households already carrying record levels of indebtedness, David Madani of Capital Economics said, adding the knock-on effects to consumer spending could be so significant they could push Canada into another recession.

“This reality, we suspect, has not been given very much consideration at all,” he said. “All I am trying to do is step back and look at the longer-term picture of affordability.”

In a low-inflation environment, it’s harder for asset prices and wages to rise to make the burden of debt more manageable, Mr. Madani said.

In a report to clients, he said the fall in prices could start this year if the Bank of Canada raises its benchmark rate, which stands at 1%. Mr. Madani, one of the few economists to predict no rate hikes for all of 2011, warned an increase could mark the “tipping point” as consumer sentiment could swing rapidly.

The federal government last month decided to toughen mortgage-lending standards for the third time in as many years in an effort to curb Canadians’ appetite for taking on too much debt, which is at a record 148% as measured as a ratio to disposable income.

This pessimistic view isn’t widely shared.

Gregory Klump, chief economist at the Canadian Real Estate Association, said he does not foresee such a scenario, given present economic fundamentals, whereby housing prices would contract by a quarter.

“The continuation of low interest rates would [help] support housing activity in 2011,” said Mr. Klump, who is in the process of updating his forecast for this year and next. CREA has said it expects housing sales to drop 9% this year, with the average house price falling 1.3%.

In a recent report, economists at Toronto-Dominion Bank said the worst-case fears, such as a U.S.-style housing collapsed, had been avoided. A trough in existing home sales emerged in the third quarter of 2010, or earlier than expected, TD said, and that “better” affordability would provide momentum while the Bank of Canada holds its policy rate as is until mid-2011.

But Mr. Madani doesn’t see it that way. The underlying theme in his analysis is that housing affordability would deteriorate, as inflation remains relatively low for some time. In a low-inflation environment, he argued, Canadians’ debt burden doesn’t dwindle as nominal rates (not adjusted for inflation) remain low and wage growth slows. In a separate report released Thursday, economists at Goldman Sachs said concerns over higher inflation in developed economies are “misplaced” and wouldn’t emerge until there is real GDP growth that exceeds potential “for some time.”

According to Mr. Madani’s calculations, the average house price, of $314,000 as of the third quarter of 2010, is roughly 5.5 times greater than the average level of disposal income, at $58,347. Historical data indicate the average house price is roughly 3.5 times greater than disposable income — which, he suggested, translates into an average value of $205,000 for a Canadian home, or 3.5 times above the $58,347 of disposable income.

To get back to a historical average, he calculates a housing price decline of roughly 25% over a number of years on the assumption that inflation-adjusted mortgage rates remain unchanged and growth in disposable income of 2% -- which is “slightly generous” given his low inflation outlook.

The Bank of Canada cited a “sudden weakening” in the housing sector as potential downside risk to its recently updated economic outlook. Such an event “could have sizable spillover effects on other areas of the economy, such as consumption, given the high debt loads of some Canadians.”

The central bank said inflation, both headline and core, would not converge to the preferred 2% target until late 2012.

Financial Post

Mortgage deal revives stalled securities market

STEVE LADURANTAYE — REAL ESTATE REPORTER

From Thursday's Globe and Mail

Published Wednesday, Jan. 26, 2011 7:02PM EST

Last updated Friday, Jan. 28, 2011 6:30AM EST

Canada’s moribund commercial mortgage-backed securities market is awakening from a three-year slumber.

Two major real estate companies are tapping the market for $206-million in the first deal of its kind since 2007, signalling that investors are returning to a sector they had abandoned over worries about the health of the country’s commercial real estate market.

Prior to the recession, Canadian real estate companies went to the CMBS market for about $4-billion a year in low-cost financing. The market literally vanished as lenders retreated and investors shunned higher-risk securities, forcing real estate companies to obtain mortgages almost exclusively from large banks.

The resurgence could make it cheaper for real estate companies to raise the money they need to expand their portfolios, driving up property values as more bidders vie for buildings. It will also give investors other than banks the chance to add secured mortgages to their portfolios.

A deal put together by Institutional Mortgage Securities Canada will see RioCan Real Estate Investment Trust(REI.UN-T23.300.090.39%) andCalloway Real Estate Investment Trust(CWT.UN-T23.990.230.97%) take out mortgages on 16 properties, which will then be securitized and sold to investors looking for yield.

“We’ve been getting a lot of investor calls and there seems to be interest,” said Erin Stafford, an analyst at DBRS Ltd. who helped rate the securities. “We met investors last year and there seemed to be some appetite again – people were asking what it would take to bring this market back.”

The properties behind the deal – which is still being shopped to investors – are so-called power centres in cities such as Winnipeg, Edmonton and Sherbrooke. Many have a Wal-Mart as an anchor tenant, with other retailers such as Shoppers Drug Mart and Rona also taking space.

The deal has broad implications for the country’s real estate investment trusts. Because banks have been the only lenders willing to take on mortgages, the lenders have been able to charge higher rates.

“This makes for a pretty interesting option for borrowers and adds to competition amongst lenders,” said Alex Avery, executive director and REIT analyst at CIBC World Markets. “The banks have been achieving very wide spreads on commercial mortgages.”

Meanwhile, the companies can take a property out of the mortgage pool at any time, and replace it with another of similar quality. That’s key to both RioCan and Calloway, which both hope to attract expansion-minded U.S. retailers to their properties over the next 10 years.

A slew of retailers have expressed an interest in expanding to Canada over the next decade, with Target Corp. already agreeing to spend $1.8-billion to buy most Zellers stores and convert them to Target’s banner by 2013. Most of these expansions will require retrofits of existing properties.

Landlords need permission to renovate or sell buildings under traditional mortgages, but would not need to seek approval if they pluck the building out of its CMBS pool and replace it with something else.

“Most mortgage lenders – understandably – want you to come back to them if you are about to do anything,” said Simon Nyilassy, chief executive officer of Calloway. “It is not going to be a static market over the next 10 years, and this gives us a lot of flexibility.”

CMBS loans have been fingered as one of the main culprits of the U.S. commercial real estate crash, as an abundance of lenders and a voracious appetite among investors led to billions of dollars in risky deals being financed. The flood of money also drove asset prices higher, as more buyers competed for properties.

The U.S. CMBS market has been struggling to recover, with deals expected to climb to $45-billion (U.S.) this year, according to JPMorgan Chase & Co. Banks arranged $11.5-billion of the debt in 2010 compared with a record $234-billion in 2007, according to Bloomberg. In the U.S., delinquency rates ended the year near 8 per cent. In Canada that figure was about 0.3 per cent.

“The demand from investors was so high in 2007 that investors weren’t concerned about too much,” Mr. Avery said. “That turned out to be a bad thing. In Canada, we’ve always maintained a more stringent approach and made sure loans were properly structured before securitizing them.”