Unfortunately, there is now a wildfire season in BC. Worse, the wildfire season is now in its early stages. This makes it even more crucial for REALTORS(r), to assist clients with managing wildfire risk.
There are some things homeowners can do that will make their homes more resistant to wildfires (check out the FireSmart TMwebsite), but homeowner insurance is what really matters. These are five insurance tips to help you buy and sell during wildfire season.
Wildfires are devastating and unpredictable. They can strike at any time, in any place.
kin is an affordable, flexible, and easy-to-use wildfire insurance that you can buy online. It’s available to everyone, anywhere in the U.S., regardless of your credit history or health status.
1. The 50km radius rule is important.
Most insurance companies won’t make insurance policies binding on properties located within 50 km of active wildfire insurance. There are some insurance companies that will insure homes with wildfires more than 25km from their home, but less than 50k. This is on a case-by-case basis. An insurer might be willing to issue a policy if a wildfire is under control within 50km (shown green on the BC Wildfire Dashboard).
2. When drafting a contract, be aware of wildfire risks
By including a “subject-to-insurance” clause in an offer, buyers can reduce some of the risk of purchasing a wildfire-prone home. The buyer may lose their mortgage if they are unable to secure insurance before the closing date.
This could result in the buyer being unable to close the deal. The Real Estate Council of BC has a sample clause. As always, counsel clients to seek legal advice about adding clauses to their Contract of Purchase and Sale.
A long completion is another way to reduce wildfire risk. A buyer might ask for a fall or other time when wildfire activity has declined to complete the purchase.
3. A “binder” is a document that an insurance provider gives you, and not just a quote.
It is important to know the difference between a quote from an insurer and an insurer “binding” you to a policy. A quote simply summarizes the coverages offered and the price for the annual premium.
An insurance provider that binds an insurance policy means they have issued it and the coverage will take effect at the agreed-upon time. Buyers should ask that the insurer align the closing date with the policy so that coverage becomes active after the sale is complete. A bound offer will not be valid if the closing dates change. The buyer should notify the insurance company to modify the effective date.
The insurer is bound to honor a policy once it has been signed (assuming that there was no misrepresentation by the buyer), even if a fire is set that poses a threat to the home or spreads to other wildfires.
4. Buyers, get insurance as soon as you can!
It’s crucial that buyers begin looking around for insurance as soon as possible, as wildfire season can make it more difficult for them to get it. If a buyer depends on insurance, delays in securing the insurance can slow down the sales process or even lead to a collapse of the deal. Tip 3: Don’t forget to get a binding offer, not just a quote!
5. Get legal advice.
If buyers or sellers are bound by a contract that is legally binding and face the possibility of a sale not being completed or needing extensions, it is important to get legal advice immediately. Reopening a contract is possible by changing the dates. Buyers and sellers should seek legal advice to ensure they are fully aware of their rights.