Numerous factors are considered when determining your home and property insurance premium.
It is important to know exactly what goes into calculating your home and property insurance premium when purchasing a home so you can use these factors to help lower your home and property insurance premium. Find out what impacts your home and property insurance rates below.
What is a Home and Property Insurance Premium?
A home and property insurance premium is the amount of money you will pay each year to keep your home and property insurance policy active. Most insurance companies offer flexible payment options, meaning you may be able to pay your home and property insurance premium monthly, quarterly, or even annually. An insurance premium differs based on many factors, but for Ontarians, home insurance averages to about $1250 per year. If you are a tenant in Ontario, your insurance will be around $210 per year on average, and a condo owner would pay an average of $345 per year.
Is Home and Property Insurance Mandatory?
In Ontario, home, condo, and tenant insurance are not considered mandatory by law. However, this doesn’t mean that it isn’t extremely important to have. If you have a mortgage, most mortgage companies will require borrowers to have a home and property insurance policy that at least covers the purchase price. Home and property insurance policies not only provide coverage to your home and contents for fire, theft, and other hazards, it also covers personal liability, including if someone is injured on your property or if you cause damage to someone else’s property.
Who does Home and Property Insurance Cover?
Your home and property insurance policy will often cover you and your family members, but if you have a special situation where a relative, friend, or roommate is also living in your home it is best to contact your Ontario insurance broker to review your policy and ensure everyone is covered.
What is Not Covered Under a Home and Property Insurance Policy?Each home and property insurance policy will be unique, however, there are some standard exclusions homeowners should be aware of. Here are some common issues that are not covered under a home and property insurance policy.
-Damage that results from lack of proper maintenance, such as rust, corrosion, wear and tear, mould, and gradual deterioration.
-Damage that results from rodents, raccoons, birds and insects.
-Flooding that isn’t the result of accidental water damage. You may want to consider adding sewer and drain backup coverage if flooding is a concern in your area. It is also important to drain your pipes in the winter if you are going to be away from your home for more than 4 days.
-A home-based business. If you run a home-based business, make sure to speak to your Ontario insurance broker to learn what additional insurance coverage you will need.
-Damage to the foundation from water or mould.
-Your jewellery is typically only covered up to $6,000 or less, so if you own expensive jewellery, art, or collectables we recommend that you speak with your Ontario insurance broker to make sure you fully understand the coverage offered in your policy and discuss any additional coverage that may be needed.
What Factors Affect Home and Property Insurance Premiums?
Since home and property insurance is so important and can help you and your family in an emergency situation, you won’t want to go without it. There may be certain ways you can lower your premium to make it more affordable. Here are some of the main factors that affect the cost of your home and property insurance premium:
The Replacement Cost of Your Home
The rebuild value or replacement cost of your home is an extremely important factor that helps to determine your home and property insurance premium. Many people mistake this for a home’s resale value but there are differences. Replacement costs include the cost of materials and labour for rebuilding your home, however, it doesn’t include the value of the property in which your home is located. If your home was destroyed, the replacement cost would be equivalent to how much it would cost to rebuild it. If your replacement cost is high then your home and property insurance premium may also be higher.
Proximity to Water
Your home's proximity to water may either increase or decrease your risk of a flood. How close you live to a lake, the elevation of your street, your drainage system, and the positioning of your home may all affect your flood risk and may factor into determining your home and property insurance premium.
Personal Claims History
Insurers use the previous history of claims within your neighbourhood to determine your home and property insurance premium and your own personal claims history.
If your home has copper or plastic piping, you may receive a better home and property insurance premium rate. This is because galvanized or lead piping is older and has a higher risk of cracking or leaking.
Having a wood stove within your home may increase your risk for a house fire and carbon monoxide poisoning if it is unmaintained or installed incorrectly. This is a factor that can affect your home and property insurance premium and your Ontario insurance broker may require an inspection to determine the impact it will have.
Certain types of wiring and older wiring may lead to higher chances of electrical fires, which may factor into the price of your home and property insurance premium.
The Age of the roof
Your home and property insurance premium will likely increase if your home has an older roof. The roof of your home shouldn’t be more than 20 years old.
If you Have a Mortgage
Your mortgage does impact home and property insurance rates. If you are mortgage-free, insurers often offer large discounts to customers, sometimes as high as 20% off their premiums.
The Age and Construction of the Home
Each year your home ages, the risks associated with it increase. This means that the age of your home may have an impact on your coverage and home and property insurance premium. The older your home gets, the more likely there will be problems associated with either the structure, piping, wiring or other elements. If you own a newer home or one made of brick or fire-resistant materials, you may pay a lower home and property insurance premium.
The Size of Your Home
The square footage of your home is a factor that will impact your home and property insurance rates. The larger your home is, the more expensive it may be to insure.
Your Credit Score
Your home and property insurance premium can be decreased by having a good credit score and credit history. It is proven that individuals with good credit scores make good decisions and may make fewer insurance claims, and this is an attractive asset for an insurance company. A credit score considers one’s financial health and credit performance at a specific point in time. Those with good credit scores will receive lower premiums. A credit score check for insurance purposes will not harm your credit score rating.
Proximity to a fire hall and fire hydrants
The proximity of your home to fire hydrants and fire halls is an important factor for your Ontario insurance broker to know as it will determine how quickly fire at your home may be able to be put out. This is typically more of an issue with homes that are located in rural areas.
Whether the basement is finished or not
Having a finished basement may mean more expensive furniture, carpets, and electronics are located in that area, which may lead to a higher home and property insurance premium.
Having a pool, hot tub, or outdoor spaYou must inform your Ontario insurance broker if you have a pool, hot tub, or outdoor spa. All of these amenities increase your liability and will affect your home and property insurance premium.
Home Security Systems
Having a security system helps to protect your home from theft, which may help lower your home and property insurance premium.
Although it isn’t mandatory by law, home and property insurance is extremely important to protect yourself, your family, your home, your property, and your belongings.
At Youngs Insurance Brokers, we are here to take your unique living situation into account and bring you the best, customized home and property insurance policy. Contact a Youngs insurance broker today to find out the factors that are impacting your home and property insurance premium and if the coverage you have is adequate.
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Disclaimer: The information provided on this blog is for educational purposes only and is not intended as professional insurance advice. The coverage, terms, and conditions of each insurance policy are unique and subject to individual circumstances. The information provided does not guarantee the availability or suitability of any insurance policy for your specific needs. You should not rely on the information in the blog as an alternative to professional advice from your insurance broker or insurance company. If you have any specific questions about any insurance matter, please consult a licensed insurance broker for personalized advice and guidance.