You know the drill: New house, new commute, new furniture…new home insurance. But then company A quotes $1,000, company B quotes $2,000, and company C needs way more information before it can offer a quote. So how do insurers calculate premiums for home policies? And what can you do to make sure yours stay low?
The more protection you want to buy, the more it’ll cost you. Coverage for a sprawling four-storey Tudor will be more expensive than for a one-bedroom condo, and insuring grandma’s jewelry collection will also increase your premium.
Don’t forget about replacement costs. A condo with top-of-the-line appliances and a pebble mosaic in the bathroom will be more expensive to rebuild than the same condo with laminate floors and whatever fridge the developer installed.
Similarly, an all-risk policy—which only excludes damage from certain rare events like earthquakes or volcanoes—will be pricier than a named perils policy, which only includes damage from common events like fire and theft. You can buy earthquake insurance as an addition to your policy
To maintain the same level of coverage while paying lower premiums, considering raising your deductible—the amount of money you have to pay before insurance kicks in.
Home insurance premiums also vary a lot by area. Insurance companies track the number, type, and cost of claims in each neighbourhood. They use that to estimate the frequency with which you’ll make a claim. If you live in an area with lots of vandalism and theft, your premiums will be higher than if you lived in the same home but in a safer neighbourhood.
Living near a fire station can also help reduce your premiums. In cities, exactly how close you are to the station doesn’t make a huge difference, but if you live in a remote area and the closest station is 40 minutes down the highway, you’ll likely pay more. After all, the sooner you can put out a fire, the cheaper it is to repair your home.
Past claims are good indicators of future claims, according to the Insurance Bureau of Canada, so insurers will also look at your claims history, and that of your property. If you or your home’s previous owners have submitted many claims, your insurer may suspect there’s a significant problem with your property. If you’ve submitted a lot of claims on your current and previous homes, it could suggest you’re not taking good care of your properties, or are even trying to rig the system. That’s not to say you shouldn’t submit a claim when your basement floods or thieves swipe your brand new mountain bike. But consider not submitting a claim for minor damage—paying for the repairs yourself may be cheaper than the premium increase.
The small stuff
Keeping your home repaired and your security features up to date will help your premiums stay low. Modern alarm systems, smoke detectors, and carbon monoxide detectors help you act faster when your home is in danger, which can reduce damage, repair costs, and premium increases.
Also considering upgrading galvanized or lead piping to copper or plastic plumbing, which is less likely to leak. In terms of electrical work, some insurers will increase premiums—or simply refuse to insure your home—if you have old knob-and-tube wiring or service under 100 amps. Older roofs and wood stoves can also bump up your premiums.
And don’t forget to tell your insurance provider if you run a business from home, host Airbnb guests, have a pool or trampoline, or start renovations. All of these activities increase the risk your insurer is taking on, and they may raise premiums to make up for it. But if you don’t let them know and they find out, your claims may be denied or your policy may be canceled outright.
To estimate your insurance costs, get a home insurance quote.