Home insurance is one of the best ways to protect your home and belongings from theft or damage. Home insurance can cover damage, theft, loss to personal possessions, accidental damage you might cause to someone else’s property (like fire damage), and injuries to visitors while they're on your property. The Financial Consumer Agency of Canada recommends home insurance that covers the cost of replacing every possession you own — whether it was destroyed or stolen — and covers any potential liabilities to others.
Rosedale by Bicycle Bob
Even though choosing the right home insurance policy might seem simple, it can get a bit complicated, and most people aren’t aware of all the aspects affecting their home insurance policy rates. The cost of homeowner’s insurance is usually based on the cost of replacing the house and its features as well as additional endorsements attached to the policy. However, there are several surprising factors that can either lower or raise your home insurance rates. Joel Laucher, Deputy Commissioner with the California Department of Insurance, explains,
Anything that adds risk has the possibility of increasing the rate or having the home not to be eligible for coverage. There may be exclusions, surcharges, or a denial.
Here's a list of some factors that have a big impact on home insurance rates.
Your house's location is crucial for determining the price you pay for home insurance. In fact, the Insurance Bureau of Canada lists home location as the primary factor influencing home insurance rates. If your home is located in an area with a high risk of natural disasters such as wildfires, mudslides, earthquakes, or tornadoes, you have to be prepared to pay significantly higher premiums. The same rule applies if your home is located in a neighbourhood with a high crime rate. In some cases, you can even have a problem getting home insurance. Tim Gaspar, owner of Gaspar Insurance Services near Los Angeles, notes,
It can be a big, big problem if you get in a situation where none of the big companies want to insure you. You have to go to a high-risk company, and they can charge whatever they want to charge you.
According to the Insurance Bureau of Canada, 50 per cent of Canadians believe their home insurance doesn’t cover damage caused by an “act of God," such as a storm. This is not true, as insurance companies don't specify or exclude “acts of God" or “acts of nature" in their policies. But this doesn't mean that all damage caused by nature and the environment is covered by home insurance.
House on a Tiny Island by The_Gut
Home insurance usually covers damage caused by wind or hail done to the exterior of the building, excluding items such as antennae or satellite dishes. Plus, the interior of a building is covered only if the storm opened the house. You can lower your rate by taking necessary precautions such as installing new windows or storm doors.
On the other hand, home insurance policies usually don't cover damage caused by flooding or an earthquake. You can purchase this coverage as an add-on to your policy.
2. Your Home’s Age and Type of Construction
A new home means new utilities, good overall shape, and an insurance discount. New homes usually have features that are easier to locate and cheaper to replace than old homes with built-it features. As we’ve already mentioned, replacement costs determine your home insurance rates. They include factors such as the price and availability of skilled labour, debris removal, extra expenses due to more demanding building codes, and similar factors. If you own an old house with a history of insurance claims on the property, you should be prepared for higher rates.
Moreover, the Insurance Bureau of Canada noted that 67 per cent of Canadians believe that, when calculating home insurance premiums, insurers consider whether the outside of a house is brick or aluminum siding. The majority of Canadians are right — construction type is an important rating factor for calculating insurance premiums. Homes constructed with robust, fire-resistant materials like brick, concrete, or stone are less expensive to insure than homes built with soft, flammable materials like wood.
3. Roofing, Plumbing, and Wiring
An old or damaged roof could make it difficult for you to get a good deal on your home insurance. Gaspar suggests that insurance companies tend to be reluctant to insure houses with old roofs made of soft materials. He adds,
"Unfortunately, you’d be limited with what insurance companies are willing to deal with it. It’s not even a price issue."
On the other hand, the Insurance Bureau of Canada remarks that if your roof has been updated within the past 20 years, it shouldn't affect your home insurance rates.
Old Pipes by Mason Masteka
A similar rule applies to plumbing. The older the pipes, the more you’ll have to pay for your insurance, as the probability of their cracking or leaking increases. Bill Wilson, vice president of education and research for the Independent Insurance Agents & Brokers of America, comments,
Companies are scared to death of water claims because they can lead to mold, and mold is very expensive to remediate.
Plus, your home insurance rates also depend on the kind of wiring you have in your home. As the Insurance Bureau of Canada explains, homes with older types of wiring, such as knob-and-tube or aluminum, have a higher risk of fire — especially if the wiring is damaged or deteriorated. Some insurance companies require a guarantee that a home doesn't have this kind of wiring. If your home has an old type of wiring, your insurance company might give you time to remove it or demand a safety inspection.
4. Proximity to Water Sources
The closer you live to a hydrant or fire station, the higher the chance of saving your property in case of a fire. Insurance providers take this fact very seriously, and it reflects in their home insurance policies. The farther you live from a water source, the more you’ll pay for your insurance. Plus, you could have different rates if your community has a professional or volunteer fire service. You should keep in mind that different insurance providers offer different rates and policies, and you always have a chance to shop around.
Houses on the Beach by Ashley Harrigan
5. Backyard Pool
Having a pool or trampoline in your backyard will increase your home insurance rate, as they're associated with numerous potential risks like drowning or injuries. The U.S. National Association of Insurance Commissioners notes,
"Backyard items, such as a trampoline or pool, may require you to increase your liability coverage with an umbrella policy. In some cases, these items may even lead a company to cancel your policy."
If you have a pool in your backyard, experts recommend equipping it with a protective cover, fence, or locking gate.
Your canine friends might cause you some problems when shopping around for home insurance — especially if they're deemed aggressive or untrained. Dog biting and maiming are very common reasons for homeowner’s insurance liability claims, so insurance companies increase rates for dog owners. Plus, some insurance providers exclude several aggressive breeds from their insurance coverage and create black lists of such animals. Joel Laucher remarked,
"Generally speaking, the lists tend to be larger animals, pit bulls, Dobermans, and there are some insurers that indicate they will not insure a pet that has shown signs of aggressive behaviour. You might have coverage after the first bite, but after that, they may exclude the animal or not renew you."
On the other hand, if you prove your animal is well trained and protects your home, you could balance the likelihood of injuries.
French Bulldog by Artur Malinowski
As you can see, there are many factors influencing your home insurance rates, and there’s a variety of insurance providers with different insurance policies. It’s important to have your home insured, but it's your choice which provider and policy you choose. You should also keep in mind that insurance is a contractual obligation and your duties don't end with choosing the right provider and policy. You should always make sure your insurance company has an accurate and up-to-date description of your home — otherwise you risk that your new upgrades or additions won’t be covered.