How Home Insurance Premiums Are Calculated

Here’s what you need to know about how home insurance is calculated in Canada

Insurance companies consider many factors to estimate the likelihood that you will make a claim, and what that claim will cost. Rating factors can vary from company to company, but we’ve gathered some information about the cost of home insurance as well as some of the main things that will affect the cost of your property insurance to help you understand how it’s calculated.

How much is home insurance?

The cost of home insurance is not a one size fits all answer. In fact, what you pay depends on quite a few different factors. From your location to the wiring in your home and how your home is heated (read more on all those things below), lots of things can impact how much your home insurance costs. The best way to get an accurate idea is to get a quote online and you can do it in as little as three minutes.

How does where you live affect your home insurance premium?

Location, location, location. Your address can make a big difference. Using your postal code, insurance companies can track claims made in that location and use the information to determine the likelihood of a claim occurring. They can then adjust premiums based on past experience in your neighbourhood. 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 indicator used to adjust 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 the age of the structure affect home insurance premiums?

As a building ages, the risk associated with it increases and so does the premium. As the overall infrastructure wears down, there is a higher risk of a faulty/leaky pipe (potential for water damage claims increases, etc.). Newer homes generally pay lower premiums and they increase as the homes age. It’s worth noting that if you make updates and renovations (like replacing a roof), the effect of the building aging decreases.

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 wiring does your home have?

A variety of factors associated with your electrical system can affect the risk of fire and, with it, the cost of insuring your property. Such things include breakers posing less of a risk than fuses, and older wiring increasing the risk of fire.

What type of basement does your home have?

Basements are no longer used primarily for storage and laundry. Many basements are finished (as homeowners look for more living space) 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 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 Family Coverage and Claims Forgiveness. There is also other optional coverage such as Identity Theft or Personal Umbrella 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 have a policy that covers the common areas outside of your unit. Your own policy will include coverage for your contents, improvements or betterments, loss assessment, additional living expenses (if you can’t live there while repairs are being made after a claim) and liability coverage. To find out more details on each of these coverages and learn more, you can read this article about What is condo insurance?.

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, additional living expenses (if you can’t live there while repairs are being made after a claim) and liability coverage. To find out more details on each of these coverages and learn more, you can read this article about What is tenant insurance?

Are there ways to save on home insurance?

If you’re looking to save on home insurance there are a few ways to do it. Consider adding the following to take advantage of our Home Security Savings (available to those with Home Coverage or Enhanced Home Coverage):

  • A centrally monitored water alarm that sends an alert if there is a leak or flood in your house
  • A centrally monitored fire or burglar alarm

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 quickly and easily.

If you're an existing customer and have questions about your policy, please visit the Contact Us page.

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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.