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 that 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. Although rating factors can vary from company to company, we’ve gathered some information about the cost of home insurance – as well as a few ways you could save – to help you understand how home insurance premiums are calculated.

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. From where you live to the age of your home and how your home is heated (read more on those topics below), lots of things can impact the cost of your home insurance.

Want to know how much home insurance costs for you? Get a quote online.

What does home insurance cover?

Most home insurance policies 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, like 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.

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 those things are rare.

Is your home near a fire station or 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 hydrant or station. 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 may be greater, influencing the cost of 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?

As a building ages, the risk associated with it increases and so does the premium. For example, as the overall infrastructure wears down, there is a higher risk of things like a  roof leaking after a heavy rainstorm that could increase the potential for water damage claims.

Newer homes generally pay lower premiums, which typically increase along with the age of the home. It’s worth noting that updates like replacing a roof help to decrease the effect of the age of the building on your insurance policy.

Does the heating system affect the cost of home insurance?

With oil heating, you may have to pay more than you would with a gas furnace or electric heat. The risk of leaks with oil tanks increases the potential for damage to your property as well as the potential for environmental hazards, which can be very costly to remediate. Wood stoves can increase risk of fire, and older model wood stoves, (especially if incorrectly installed or maintained) are a common source of house fires.

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). As such, having a finished basement could lead to an increase in your premium. Although it’s true that having a finished basement could increase the premium, it’s important you provide accurate information to ensure you have adequate coverage in the event a claim occurs. Make sure you notify your insurance company when you finish your basement.

How much is the average home insurance policy in Canada?

The average cost of home insurance varies depending on the factors mentioned above, like where you live, the age of your home, and whether you have a finished basement. Severe weather, like floods, wildfires, and windstorms can also impact the cost of home insurance. The increase in catastrophic weather events across the country due to climate change – and the rising costs of building materials – also has the potential to affect the average cost of home insurance in Canada.

TD Insurance customer? Get timely Severe Weather and Safety Alerts on your phone through the TD Insurance app.

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 Eco-Efficient Rebuild Coverage, Extended Water Damage Coverage, and Claim Forgiveness. There are also other optional coverages such as Identity Theft or Personal Umbrella Coverage that can be added based on your needs.

What if you live in a condo, is the insurance different?

Yes, condo insurance is slightly different than home insurance. A condo corporation will typically have a policy that covers the common areas outside of your unit. Your own policy will include coverage for your unit, 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.

What if you rent, does it work differently?

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 stolen1. 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.

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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.