How Home Insurance Premiums Are Calculated
Here’s what you need to know about how home insurance premiums are calculated in Canada.
Whether you rent or own your home, there's a good chance you've purchased home insurance coverage to help protect your home and belongings. And if you've ever bought home insurance, you've probably wondered how your insurer determines the cost of your home insurance premium.
Home insurance costs depend on several factors, which can vary from insurer to insurer. We've put together this quick guide to explain how home insurance premiums are calculated—as well as some tips to help you save.
What does home insurance cover?
Home insurance policies generally cover the structure of your home, your personal belongings, and additional living expenses. They typically offer financial protection for loss or damage due to events like fire, theft, vandalism, and severe weather, such as hail and high winds. Your home insurance also includes liability coverage for injuries that occur on your property.
TD Insurance customer? Review your coverage on the MyInsurance app.
If you're a TD Insurance customer, you can stay informed with Severe Weather and Safety Alerts on the TD Insurance app. And to help you be prepared, check out our tips for preventing water damage, and learn more about your water damage coverage options here.
How much is home insurance?
When calculating your home insurance premium, insurance companies consider many factors to estimate the likelihood that you'll make a claim, and how much that claim will cost. Where you live, the age of your home, and its proximity to a fire station and/or a fire hydrant are just a few of the things that could impact your premium.
Understanding what factors affect your premiums helps you make informed decisions to keep costs manageable while still getting the coverage you need. Whether it's installing a monitored home security system or exploring discounts for bundling your policies, we'll also explore several practical ways to help lower your premium without compromising on coverage.
Want to know how much home insurance costs for you? Get a quote online.
How does climate change and severe weather events impact your home insurance premium?
Canadians are facing rising home insurance premiums—and climate change is a big reason why. Severe weather events like hurricanes, hail, and heavy rain are happening more often and causing more damage. And natural disasters such as wildfires and floods are also on the rise, leading to increased risks for homeowners.
According to the Insurance Bureau of Canada, it is estimated that severe weather surpassed $8 billion in insured damage across Canada in 2024 alone, which set a new Canadian record.1
The cause of the majority of this record-breaking damage? A summer of catastrophic weather events that resulted in approximately 228,000 insurance claims in July and August of 2024 alone2—more than double the number of claims made in the summer of 2023, and over 400% more than the 20-year average.3, 4
Compounding the problem, inflation has driven up the cost of building materials and repairs, making it more expensive to recover from the damage caused by these severe weather events—and adding to the negative impact of climate change on home insurance rates.
How does where you live affect your home insurance premium?
Your address can make a big difference when it comes to your home insurance premium. Using your postal code, insurance companies can track claims made in your area and use that information to determine the likelihood of future claims. If you live in an area with a high incidence of break-ins or vandalism, for example, your rate could be higher than what you would pay in an area where these occurrences happen more rarely.
Is your home near a fire station and or fire hydrant?
How close you are to a fire station is another factor insurance companies consider when calculating home insurance premiums. Fire is a major concern, so it’s an advantage to live near a fire station and/or fire hydrant. The closer you are, the better the chances of saving your property in the event of fire. In urban areas, proximity usually isn’t a problem. But in more remote or rural areas, the distance from a fire station and/or fire hydrant may be greater, influencing the cost of your home insurance.
Does having a monitored home security system affect home insurance premiums?
Having a monitored home security system can often lead to reduced home insurance premiums. Insurers may offer a discount to homeowners and tenants with centrally monitored security systems as they're seen as effective deterrents against burglary and vandalism, and can alert you to fire or water damage in your home. A smart home monitoring system can also help you stay connected and notify you about hazards in and outside of your home.
Does the age of the structure affect home insurance premiums? maintenance:
As a building ages, the overall infrastructure of the structure can deteriorate.
Some updates you may want to consider to help reduce the risk of loss or damage occurring to your home:
- Regular roof maintenance: Helps protect your home against leads and weather-related damage
- Updated electrical system and wiring: Reduces the risks of fires caused by outdates or faulty systems
- Updated plumbing: Helps prevent water damage from aging or corroded pipes
- New hot water tank: Lowers the risk of water-related damage from an aging or leaking tank
It's always recommended that you contact your insurance company prior to the start of your renovations to understand your coverage.
What home improvements might increase your premium?
Certain upgrades may make your home more expensive to insure because they add risks or raise the value of your home, increasing potential rebuilding or recovery costs. Examples of these kinds of upgrades include:
- Basement apartment: Creates a separate living space which, when rented out, increases your risk of liability
- Home extension: Expands the size of your home, increasing replacement or rebuilding costs after a loss
- Pool: Adds safety risks that could lead to potential accidents and liability claims
Be sure to let your insurer know about any major upgrades or changes to your home, so your coverage stays up to date to accurately protect you and your home.
What type of basement does your home have?
Basements are no longer used primarily for storage and laundry. Many basements are finished and are used for recreational purposes, often with expensive furnishings and equipment (which make for more expensive claims).
If you've recently renovated or finished your basement—or made other updates to your home—be sure to let your insurance company know, to ensure your coverage reflects the value of your improvements, so you're protected if the unexpected happens.
As a homeowner, how much coverage and what types of coverage do you need?
How much you insure your home for is usually different for different people. Typically, the more coverage you purchase, the higher your premium will be - however, this could save you money in the long run. Our Home Coverage includes our Million Dollar Solution® and covers All Risks, Personal Liability and much more.
We also offer Enhanced Home Coverage that includes extras like Claim Forgiveness, Eco-Efficient Rebuild, and increased coverage limits on high value items such as jewelry and bikes. There are also other optional coverages such as Identity Theft or Personal Umbrella Coverage that can be added based on your needs.
Is condo insurance different from homeowner's insurance?
Yes, condo insurance is slightly different than homeowner's insurance. A condo corporation will typically have a policy that covers the common areas outside of your unit. Your own policy could include coverage for your unit, as well as coverage for your contents, improvements or betterments, loss assessment, personal liability, and additional living expenses (if you can’t live in your home while repairs are being made as a result of a covered claim). Read What is condo insurance? for more details on how you could insure your condo.
How does insurance work if you're renting?
Renter’s insurance (also called tenant’s insurance) is for when you rent your house or apartment from someone else. It’s a good idea to have enough insurance to cover the cost of replacing your belongings in your home if they're damaged or stolen6. With renter’s insurance your coverage will include your contents, liability coverage, and additional living expenses (if you can’t live in your home while repairs are being made due to a covered claim). Read What is tenant insurance? to learn more.
Are there ways to save on home insurance?
If you’re looking to save on home insurance, there are a few ways you could do it, including:
- Choosing to bundle your home and car insurance.
- Taking advantage of preferred rates for university and college alumni, members of professional organizations (like engineers and accountants) and employer groups.
- Adding a centrally monitored water alarm that sends an alert if there's a leak or flood in your home, or a centrally monitored fire or burglar alarm, to be eligible for our Home Security Savings (available to those with Home Coverage or Enhanced Home Coverage).
Don’t stop there. For more savings, here are some other helpful ways you can reduce your home insurance costs.
Looking for a quote? Get a home insurance quote online quickly and easily. If you're an existing customer and have questions about your policy, please visit My Insurance or Contact Us.
Reference Articles:
5 https://www.canada.ca/en/financial-consumer-agency/services/insurance/home.html#toc1
Share this article
The content on this page is for general information purposes only and does not constitute legal advice. Coverages described herein may be subject to additional eligibility criteria, limitations and exclusions. In the event you make a claim, potential indemnification is also subject to the receivability of the claim and the type of coverage you bought.
In the case of conflict between the content on this page and your policy wordings, your policy wordings shall take precedence. Please speak to an Advisor or consult your policy wordings for further details.