Why You Are Paying What You Are For Home Insurance in Ontario
February, 24 2022
As a homeowner, you have lots of expenses to consider, and most of them are pretty straightforward. You know that your electrical bill is based on how much electricity you use and the same for the water, gas, etc. But your home insurance premiums are not that black and white. Even if you and your neighbor have the same insurance company with the same coverages, the prices of each policy can be different.
How can this happen? Keep reading for all the factors that are considered when calculating the price of your home insurance.
Factors Related To Your Home
When you first got your home insurance policy, you may recall that you had to answer certain questions about your home. This is because a large part of your home insurance premium is based on the specifics of your home.
While many different factors determine what you pay, here are some common examples directly related to your home itself:
- Replacement Cost of Your Home – Insurance companies will calculate the approximate cost to replace your home in the event of a total loss, also called the replacement cost. The replacement cost is usually the amount of coverage you carry on your policy, but this is typically also what your home insurance price is based upon. The more expensive it is to rebuild your home, the higher the price of your policy will be.
- The Location of Your Home – There are some locations that will be priced higher than others. This is because some areas are riskier to live in. For example, living in an area prone to wildfires will cost more to insure than areas that do not have this exposure. Insurers will also take local building costs and claim expenses into account for each area as well, including how close and accessible fire stations and hydrants are to the home.
- Roof Age – The condition and age of your roof is another factor insurers use to determine the price you pay for insurance. The older your roof, the more likely it will not be able to withstand windstorms and other perils covered by your home insurance. Because the risk of paying out on these types of claims is high, insurers will charge more money to insure these roofs.
- Occupancy – Whether you live in your home year-round, seasonally, or rent it out, this occupancy will also determine the price you pay. Secondary homes that are unoccupied for some period of time are a higher exposure for insurance companies than primary homes, where the homeowner is available to detect and address any potential concerns before they turn into claims.
Factors Unrelated to Your Home
In addition to factors directly related to the home, there are some other vital pieces of information that insurers use to base the price of your policy. Some of these factors include the following:
- Prior Claim History – If you have had property insurance previously, either a renters, condo, or homeowners policy, any claims you have made will be considered in the rate determination of your home insurance policy. Insurers use your prior claim history as an indicator of the likelihood of future losses. Typically, the more claims you file, the higher the price of your policy may be.
- Credit Score – While insurance companies do not use credit specifically, they do typically use a credit-based insurance score to price policies. While this is not allowed everywhere, it is allowed for home insurance in Ontario. Therefore, if you have a favorable credit score, you could be paying less for your home insurance.
As we mentioned previously, in regards to replacement cost, coverage can obviously play a massive part in how much you pay for your home insurance. But it is not just limited to the replacement cost of your home. Any endorsements you add to the policy to increase coverage will also impact your price.
For example, if you have any fine artwork, jewelry, or artwork that you are insuring for a specified amount, you will pay extra for that.
The deductible amount you choose will also play a part in the premium determination of your home insurance policy. As you may know, a deductible is an insured’s out-of-pocket expense related to a claim. When a homeowner’s policy is purchased, a deductible is selected, and this amount will be what the homeowner pays before the insurance company issues payment for any damages.
An insurance company can vary these deductibles, but they usually range from $250 to $5,000. The higher the deductible you choose, the lower the price of your policy will be.
Last but not least, any applicable discounts added to your policy will impact the price. The discounts offered will be different depending on the insurance company you choose. However, some standard ones offered by most companies are:
- Alarms – Discounts are often provided for homes that have anti-theft device systems like burglar alarms or security cameras, but also fire alarms. More recently, companies have started to offer discounts for smart home devices that can detect water leaks as well.
- Claim Free – If you have not filed any home insurance claims in a certain period of time, typically about five years, companies offer a slight credit on your policy.
- Multi-Policy – The more policies you have with a particular company, usually the more discounts you will receive. Look at bundling your auto insurance with the company that writes your homeowners’ policy for credit on both.
- New Home/Renovation – If your home is newer or you have recently completed a major renovation, check with your insurance company about what discounts you may qualify for. Some companies will offer discounts for newly built or recently updated homes.
Now that you have learned all the factors that go into your home insurance determination, what should you do next? While some rating factors are outside of your control, it is always a good idea to compare prices and discounts with different carriers to ensure you are getting the best deal.
Confer with the experts at Duliban Insurance Brokers to get a quote today!