We all love our homes, don’t we?
Apart from being an emotional attachment, it is also a significant investment. Thus, it is important to secure it against possible perils. This includes natural disasters, burglars or thieves and the like. The best way to do so is by getting a home insurance plan.
However, most homeowners wonder, “how is home insurance calculated?”. It is equally important to determine the amount of insurance you must get. In today’s article, we will discuss how different Ontario home insurance brokers calculate insurance premiums in Canada.
How much will your home insurance cost?
The premium you pay for your home insurance policy depends on various factors. Many things impact your homeowners insurance cost, from your home location to the type of electrical connections in your house and how your apartment’s HVAC is functioning.
Apart from these, insurance companies in Canada consider numerous other factors to estimate your probability of making a claim and what that claim amount will cost.
Why does home insurance premium vary for different persons?
The correct home insurance policy should offer enough coverage to help you rebuild your house from scratch in case there is total loss or damage. The cost may vary from the amount you paid for your home because of these reasons:
- The insurance provider will consider the features and upgrades that you have made to your house
- The price of the land is also included. But as you are not re-purchasing the plot, the insurance policy will not cover the land cost.
How is home insurance calculated? — 6 factors that influence the cost
If you are still unsure how home insurance is calculated, here are some factors that reputed insurance providers consider:
Location of house
The location of your house will make a huge difference. Most insurance companies can track the number of claims made in a particular area using its postal code and use this information to determine your probability of making a claim. The insurer may also calculate the premium charges based on past experience in your neighbourhood.
In simple words, if your area has a higher number of cases of vandalism, theft, burglary, or break-ins, your premium charges might be higher than what you will be paying for safer areas. So, for example, if your house is in a low-lying area and there is a higher probability of flood risk, your premium might be a bit higher.
Age of the property
If you have just built your house, the insurance premium charges will be less for the first 5 to 7 years as there will be minimal risk associated with the property. However, as the building ages, the risk associated with it increases, along with the insurance premium.
As the overall property starts to wear down, there is a larger risk of a faulty electrical connection or a leaking pipe. However, if you have made updates or repairs, the effect of the wear and tear would decrease.
Valuable content or belongings in the house
You must specify the number and value of valuable possessions in the house before applying for an insurance policy. These possessions’ worth will also be accounted for while calculating your home insurance premium.
The type of basement
Unlike the old times when these basements were only used for storage and laundry, most basements are considered additional living spaces by the resident or are used for recreational purposes like gaming rooms and small movie theatres. Therefore you might have expensive items in your basement, and this could potentially lead to an increase in your insurance premium.
So make sure you notify your insurer and provide them with the correct information to ensure that you have the proper coverage.
The proximity of a fire station or hydrant
Fire is a major concern for Canadian residents. However, living near a fire station or a water hydrant is an advantage. The closer your property is to a fire station, the better the chance you might get a significant discount on your insurance premium.
Usually, proximity is not a big issue in urban areas. However, in remote areas, the distance might be higher. So your premium will be calculated based on the distance between your property and the hydrant.
Type and condition of the heating system
You will come across numerous types of heating systems in the market. So if you own an oil heating system, you might have to pay more towards your insurance premium than you would have if you had an electric heating system or a gas furnace. This is because there is a higher probability of oil leaks, which increases the chance of damage to your house and environmental hazards.
Also, if not maintained properly, some furnaces, like older model wooden stores, are fire hazards.
How to get an approximate insurance premium cost?
The best way to calculate the premium charge for your home insurance policy is to get a quote online from a reputed insurance broker. But before doing that to get an estimate, you can calculate the average insurance premium based on the following things:
- The cost of the contents and personal belongings in your apartment, which will include valuables like jewellery
- The type of home ownership, whether it is owned or rented
- The total sum insured is calculated depending on the construction cost and the built-up area.
- The deductible you are willing to cover. The higher the deductible, the lower will be the premium. If you reside in a high-risk area, it is advised to keep the deductibles low.
How is home insurance calculated? — Endnote
So these are the factors that answer the common question, “how is a home insurance premium calculated?”. Only insuring your house is not enough. You have to look for the correct amount of coverage so that you do not need to exhaust all your savings in case of a hazard or an unexpected mishap.
It is best to get in touch with the best online insurance brokerage. They will help you choose the best policy according to your needs.
