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Your home is probably your biggest investment and the best protection for that investment is home insurance. Your home insurance policy is basically broken down into two main components: coverage for your property (e.g. the home itself, your contents and possessions) and liability (e.g. if someone slips and falls on your stairs and they sue you for lost wages). There are varying levels of coverage from the very basic to comprehensive, and the more protection you have the more you'll pay in premiums.

But what specifically affects your home insurance rate? As you make your house your home, we break down some of the things that may influence the rate you pay for your home insurance coverage.

Table of Contents

What impacts your home insurance rate?

1. Shopping around

If you want to spend less on your home insurance, your best opportunity to save will likely come by shopping around. Compare what you pay to what other home insurers offer to see if you're overpaying for your coverage. It could save you hundreds of dollars because no two insurers are alike and each insurance company charges different rates that are based on their own claims experiences. Compare home insurance quotes today in minutes and find out how much you could be saving! Our service is absolutely free and you won't get a cheaper price by going direct.

2. Deductibles

Your homeowner's deductible is the amount you are willing to spend out-of-pocket towards the total amount of an insurance claim. It is also one of the tools at your disposal to help you keep your home insurance premiums in check. How so? Well, raising your deductible is an easy way to lower your rate. For example, if your deductible is currently $200, raising it to $500 or even $1,000 can make a big difference on your premiums—possibly saving you as much as 25 per cent. The key thing here to remember however, is to keep your deductible affordable because this is the amount you'll need to pay should you need to make a claim.

3. Home insurance discounts

Ask about discounts. Don't be shy, it's your money. Discounts are a great way to lower your rate. Some common home insurance discounts that can help you save include the non-smoker discount, new home discount, the mortgage-free discount, and the multi-line discount.

4. Bundling

We all know when you bundle your phone, Internet and television services you often get a better price. The same is true for insurance. If you buy your home insurance from the same company you bought your car insurance from, for example, then you'll likely qualify for the multi-line discount. Multi-line is insurance jargon for what might be better described as multi-product, and this discount can save you five to 15 per cent off of one, or even both of your policies. However, you still need to shop around to make sure that the combined cost of the policies is lower than what you would pay if you bought two separate policies from different insurance providers.

5. Claims history

Past claims are often an insurers' best predictor of future claims. Depending on how often you submit claims, you may see your rates increase. As a general rule, a single claim won't flag you as a high risk, but repeat claims will. You may also lose any claims-free discount.

6. Credit history

How you manage your finances is viewed as a predictor in the frequency and severity of home insurance claims, and some home insurance providers—where allowed—use your credit score, with your permission, as a rating factor in your home insurance rate. That said, you don't have to give them permission to check your credit score however, not doing so means you'll likely pay a higher rate.

7. Multiple mortgages

Like credit score, how you manage your finances is viewed as a predictor in the frequency and severity of home insurance claims. If you have more than two mortgages on the home you're looking to insure, you may find it difficult to get the coverage you need as your options may be limited, or the premiums higher.

8. Building materials and finishes

Homes built with materials like marble and hardwoods are usually more expensive to insure than homes without these pricey materials because they increase the replacement value of the home. The replacement value of your home is the price to rebuild your house (with materials of like kind and quality) after a serious loss, like fire. Because the home would cost more to replace, the insurance premiums are often higher as well.

9. Furnishings

Homes are getting bigger, and larger homes require more furnishings. Add to this the popularity of big ticket items like high-end media equipment, wine cellars, finished basements and top of the line appliances and you've got a whole lot of stuff that is going to cost more to replace. As a result, your insurance is going to cost more as well if you want it all covered.

10. Safety features

Having or installing extra safety features in your home isn't just beneficial for protecting your family, it could save you on your home insurance premiums as well. By installing a monitored alarm system, smoke or carbon monoxide detectors, or a sprinkler system (in your house, not your lawn!), you could qualify for reduced home insurance premiums. Make sure you advise your insurance provider if you have or add any of these safety features, otherwise, you won't see the discount on your policy.

11. Neighbourhood

Your neighbourhood will factor into your home insurance rate. Insurers keep an eye on neighbourhoods where claims are common. If you live in a neighbourhood that's prone to sewer backups, for example, your home insurance rate will reflect the increased likelihood that you may need to submit a claim.

12. Extreme weather and water damage

According to the Insurance Bureau of Canada, claim payouts from severe weather have doubled every five to 10 years since the 1980s. In fact, water damage has surpassed fire as the number one cause of home insurance losses in much of the country. Extreme weather events, as well as old and aging infrastructure (e.g. sewer systems), have increasingly had an impact on the home insurance premiums we pay.

Water damage coverage is complicated and evolving. Your home insurance will usually cover damage resulting from a "sudden and accidental discharge of water" like a burst pipe or broken water heater. You'll also be covered for a sewer back-up but only if you have this endorsement on your policy. (It's optional, and you'll have to specifically request it.)

Overland flooding (like a river overflowing), until very recently, was not a coverage option available to homeowners in Canada. However, several home insurance providers are beginning to consider, and in some cases offer, overland flood coverage.

13. Swimming pools

Swimming pools not only increase the replacement value of your home, but they increase the potential for a liability claim if someone drowns or is injured. Chances are, a home with a pool will cost more to insure as a result.

14. Roofing

Your roof plays a significant role in protecting your home. The older your roof the greater the chance for leaks or other damage. If your roof is well past its prime you may find it difficult to get the coverage you need without replacing it.

15. Plumbing

Don't worry if you're not a plumber, you can tell the age of your plumbing by looking for newer plastic or copper pipes instead of the older galvanized or lead type. These older pipes are more likely to rust or corrode increasing the chance of water damage and an insurance claim.

16. Electrical wiring

It's estimated that about 20 per cent of all fires in Canada are due to electrical fires, which is why insurers pay special attention to a home's wiring. Knob and tube, aluminum wiring, fuses, and 60-amp electrical service will typically require an update to your home's electrical to get coverage. If it's not required, and your able to get a policy, your home insurance premiums will likely be higher.

17. Wood-burning stoves and fireplaces

If there's a wood stove or fireplace in the house a home insurer may want to have it inspected before providing coverage to ensure it has been properly installed and maintained. Even with proper installation and regular maintenance, your home insurance rates may be higher to reflect the increased chance of fire.

18. Heating

Oil tanks have the potential for causing costly environmental hazards and your home insurance provider will ask you a lot of questions about the age and condition of your tank. You may pay more for your home insurance if your home is heated by oil.

19. Proximity to fire hydrants and fire stations

For most people living in an urban area, hydrants and fire stations are frequent and nearby. However, if you live in a rural area your home insurance rate will be affected by how near, or far, the closest fire hydrant and station are to your house. Fire is always a concern for insurers, and there's a premium advantage for living near a fire hydrant or fire station.

20. Running a home-based business

Your home may be where you lay your head at night, but is it also where you work? When your workplace is also your home-base then you might be under the mistaken belief that your business is insured under the liability and contents coverage you have with your home insurance policy; it's not, unless your home insurer knows you operate a business out of your home. Depending on the type of business, you may need to add a home business extension to your current policy, or get a separate commercial insurance policy to ensure your business is adequately protected.

21. Having tenants

If you build a rental suite in your home, you'll likely increase the value of your property. Keep your home insurer in the loop about improvements so that you don't find yourself underinsured in the event of a loss. Additionally, your home insurance policy will need to be updated to reflect the fact that the home is no longer a single-family dwelling but now a multi-family dwelling.

Protecting and maintaining your home

If you love your home, it will love you back, and the best way to avoid having to submit a home insurance claim is to give your home some TLC with regular maintenance.

Did you know? Home insurance does not cover maintenance or upkeep; it's intended to provide coverage for losses that are not predictable or avoidable.

Tips for preventing water damage

The best defense against water damage, followed by a home insurance claim, is to prepare your home ahead of time:

  • Grade the ground around your home to slope away from the house not toward it, otherwise you run the risk of water pooling against the home and possibly into your basement.
  • Regularly clean your eavestroughs and downspouts.
  • Add a downspout extension that extends at least 1.5 metres away (5 feet) from your home so that the water drains toward the street.
  • Install a backwater valve (you'll need a plumber to do this) to minimize the chance, or lessen the damage, from a sewer backup.
  • Consider installing a sump pump, and make sure it empties onto a permeable surface at least 2 metres (6.5 feet) from the foundation wall.
  • Watch for cracks in the foundation. While not all cracks are a problem they shouldn't be ignored. If you can fit a dime into the crack, or if it gets bigger have it checked out. If it's a minor crack, seal it.

Fire prevention tips

It's estimated that there are about 24,000 house fires each year in Canada. Keep your family safe and minimize the chance of fire happening where you live:

  • Did you know most home fires happen at night when everyone is sleeping? This is why it is so important to install and maintain smoke alarms on every storey of your home and outside sleeping areas.
  • Plan and practice a fire escape plan with everyone in the house. Look at all of the different ways out of each room, and set out a predetermined meeting place outside of the home.
  • If you use portable heaters, give them space—at least a 1 metre (3 feet) bubble. Make sure they're not placed near anything flammable and never leave them on while sleeping.
  • Did you know careless cooking is the number one cause of fire-related injuries? Be careful in the kitchen and never leave stovetop cooking unattended, keep the cooking area clear of combustibles (potholders, towels etc.) and never leave the home when cooking the oven.
  • Have a fireplace inspection and sweeping done by a professional at least once a year, or after burning a cord of wood, to minimize the chance of a chimney fire.
  • Keep all matches and lighters out of sight and reach of children.

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Home insurance

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