HOW ARE MY HOME INSURANCE RATES CALCULATED? The Basics
It isnâ€™t terribly often that a house burns down or is badly damaged or even broken into, but that doesnâ€™t mean home insurance is something you can do without. Your home is likely the biggest investment you have, and itâ€™s crucial that you have adequate coverage. Basically, your home insurance will cover things like damage, theft, injuries people sustain on your property and accidental damage to a neighbouring home. Calculating home insurance is based on risk, and the likelihood of you making a claim. Here are some factors that go into the calculation.
Location Certain events that would result in a homeowner making an insurance claim or statistically more likely in some areas, and will result in higher premiums. These may include:
Theft Fire exposure Vandalism Flooding or sewer back up
Replacement Cost The cost of replacing your home and its contents are perhaps the biggest factor in calculating your home insurance rates. If you have a larger house and it is filled with expensive items, it will naturally cost more to replace should it be destroyed. Likewise, a smaller home with fewer possessions wonâ€™t cost as much to replace, and you can expect to pay less.
Age and Condition Along with the size, the age and overall condition of the house are also factors in what you will pay for home insurance. Newer homes generally have fewer claims, and if your home is older you should let your agent know about any renovations youâ€™ve had done that could lower your premiums. These may include the shingles, plumbing or heating system.
Type of Home According to your insurance provider, the type of home you live in is a factor in how much youâ€™re going to ultimately pay for home insurance. Fully detached, semi-detached, row townhomes and high rise apartments can all affect your premiums differently.
Type of Home Heating Some of the different types of heating you may have in your home that can affect premiums include:
Natural gas forced air Oil forced air Electric forced air Hot water Radiant heating Wood burning
Your Deductible Just like with car insurance, if you opt to pay a higher deductible on your home insurance you will pay lower premiums. Work out the numbers and different possibilities before you sign your policy, so you can find the situation that works best for you.
Proximity to Hydrants If you are closer to fire fighting amenities, you will usually pay less than people who live in homes farther away. Fire fighting amenities may refer to fire hydrants or the local fire station. The closer you are to either or both of these will improve the odds of your home being saved during a fire.
Home Security Since vandalism and theft are big factors in calculating home insurance, having a quality home security system in place should give you a break on your premiums. Ask if your insurance provider recognizes certain systems over others, then do your best to have one installed. Many systems also include smoke and fire detection, which will help even more.
References http://www.fcacacfc.gc.ca/eng/resources/publications/Insurance/InsuranceBasics/Insur anceBasics-10-eng.asp Financial Consumer Agency of Canada
http://www.ibc.ca/en/home_insurance/introduction/how_home_rates_ calculated.asp Insurance Bureau of Canada
http://www.mollerinsurance.com/homeInsurance.html Moller Insurance