Insurers take various factors into account to set your home insurance premium, such as the type of building you live in, the fire protection offered in your municipality, the value of the insured property, as well as the coverage and deductible chosen.
1. The building
Your home insurer evaluates certain features of your home, including age, location, construction materials used or cost to rebuild in order to determine the required insurance amount. If you own a house or a condominium, the insurance amount for the building should not equate the amount of your mortgage – which generally includes the land value – but rather the amount required to reconstruct your home.
Features taken into account by your home insurer:
- The construction materials used to build your home: wood, brick, aluminium siding or concrete
- Your home’s age and size
- Your home’s location: country side or city? In a residential, commercial, new or historic neighbourhood?
- Your home’s heating system (electricity, gas, oil), including a secondary source of heating, for example, a wood or gas stove
- The cost to rebuild your home in case of a total loss. Note that this amount is not the same as its market value or its municipal evaluation
- The number of units in the building (if you own a condominium unit)
- The presence of a business in the building
2. The deductible
The deductible is the amount that you accept to pay in the event of a loss. The home insurance deductible usually varies between $300 and $1,000. Choose your deductible based on what you would be able to pay in case of a loss.
3. Fire protection
Your insurer also evaluates the fire protection services in the neighborhood where you live. If a fire were to break out in your home, how far is the nearest fire hydrant? How far is the fire station from your home? If you live in a condominium, does the building have a sprinkler system?
4. Loss experience
Your home insurer will take into account how many and what kind of claims you’ve already made. He’ll also look at the crime (theft, vandalism) and fire rates in the sector where your home is located.
5. Policy and coverage chosen
The level of coverage you choose determines your premium:
- Type of policy chosen (Specified Perils or Comprehensive)
- Endorsements (additional coverage) added your policy
- The deductible you choose
6. Value of property to be insured
Your home insurance premium also takes into account the coverage you have chosen.
Do you know how much the personal property in your home is worth? This information is important. If your home were to be destroyed by a fire, how much money would you need to replace all your belongings? Having an inventory will help you list all your belongings and know how much coverage you need.
7. Credit information
Your credit information is also one of the factors used by most insurers.
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