12 things that go into your home insurance rates
Buying a home is generally the largest investment the vast majority of people make in their lifetime, and home insurance is what protects that investment. Despite the fact a mortgage holder will require you to insurance your home to protect their own interests, even a mortgage-free home should be fully insured.
As well, not many people are in a financial position to rebuild and refurnish their home in the event of a total catastrophic loss. Nor can most cover the costs of a lawsuit payout were someone to injure themselves severely in something like a slip and fall accident while visiting your home.
There are many factors that can affect your homeowners’ insurance rate, but just like car insurance rates, what you pay can range widely between different insurance providers for the exact same home at the exact same address.
Then what, you may wonder, specifically affects your rates?
And, just like auto insurance, home insurance rates can vary substantially between insurers for the same home at the same address. But what affects your home insurance rate specifically?
- The age of the house
Newly built homes with the most current electrical, heating, and plumbing systems are often less probe to a variety of hazards, which means you’re less likely to have a claim. Because of this, some providers offer a ‘new home’ insurance discount that lowers your premium.
- Your claims history
If you’ve got a few claims on your insurance record, you’re likely to end up paying higher rates than if you had one or none. But that doesn’t mean you shouldn’t file a claim when necessary. Generally speaking, one claim won’t mean file will be flagged as being a high-risk.
- Replacement cost
A house that boasts upgraded finishes like marble, hardwood, and granite is going to cost more to insure than a similar home on the same size lot that is finished in lower cost materials. The same is true for a larger home with more square footage. It all comes down to what it’s going to cost your insurer to rebuild your home after a significant loss from something like a fire.
The neighbourhood your home is located in is also going to play a part. If you live where there have been numerous claims over the years for sewer backups as an example, that will maker a difference, and you can expect to pay a higher rate that if you lived somewhere that has not historically been an issue.
- Having a pool
While swimming pools do increase the replacement cost of your home, the more likely issue is the fact a pool increases your exposure to liability claims should someone drown or get injured slipping on wet decking next to the pool.
- How close help is in an emergency
If you live in town, chances are you’re not that far from a fire hydrant or even a fire station. But if you live in a rural or remote area that’s not the case. All other factors being equal, your home insurance rate will likely be higher than it would be for located in an urban setting.
- How you heat your home
If you have a wood stove or fireplace, it’s far more likely that you will experience a fire than a home without either of those two items. That’s just the reality of the situation. Your rates will also be higher if your home is heated with oil, since oil tanks have the potential for causing expensive environmental issues. If you do heat with oil, expect questions about the age and condition of your oil tank.
- The age of the roof
The older your roof is, the more likely you are going to experience issues such as leaks or the loss of shingles in a wind storm. If your roof is in dire need of replacement, chances are you’re going to pay higher premiums than if it were considered up-to-date.
- Do you have renters
While the idea of renting out a level of your home can be a way to help pay down your mortgage or otherwise get a return on your investment, it can also impact your home insurance premiums. If you have tenants, your house is no longer considered a single-family dwelling. Multi-family properties come with a different set of risks that will be used to calculate your home insurance premium.
- Electrical wiring
Because of its potential to significantly increases your chances of having a fire, insurance companies look closely at what kind of electrical service you have. This is a significant factor in older homes where there is knob and tube wiring, aluminum wiring, or there’s a fuse box instead of breakers. Insurers also consider homes with less than 100-amp electrical service to pose an increased risk for claims.
Old galvanized or lead plumbing almost always translates into an increased chance of water damage and an insurance claim because the pipes are more likely to rust, crack or corrode. That means you’ll pay more over a similar valued home with newer copper or plastic plumbing systems.
- A home-based business
A homeowner’s insurance policy is designed to protect your residence, not a place of business. Combining the two can mean an increase in potential claims exposure. You can add a home business extension to your current policy, at additional cost, but that will ensure both your home and your business are adequately protected. Without the extension, you’re risking both.