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5 Reasons Why Your Home Insurance May Be Going Up

March 11, 2015

You haven’t filed any claims, so why is your home insurance going up? It’s a common question that boils down to insurance trends. Insurance rates are based off more than just your personal claims history. They also take into account your company’s claims experience and the types of claims they commonly deal with.

Here are five reasons why your home insurance may be going up—and one easy way you can save on your home insurance.

1.    Worsening Weather Conditions

Flooding. Winter storms. Freezing rain. Downed trees. Canadian weather has no doubt become more severe over the past few years.  This means insurance companies are paying out more than ever for weather-related claims, an expense that is passed on to all insurance policyholders.

To put it in perspective, the 2013 ice storm in Toronto caused more than $200 million in insured losses, while flooding in Alberta cost $1.7 billion. In total, weather was responsible for $3.4 billion worth of insurance payouts in 2013.  In fact, Intact reports that between 2006 and 2012, “the amount of insurance damage resulting from extreme weather in Canada increased by over 650 per cent.”

Insurers have responded not only by redistributing some of these costs among all policyholders, but also by looking into or changing the coverage offered for weather-related claims. Homeowners are advised to carefully review their policies to learn what is and isn’t covered in regards to weather.

2.  Bigger, Better Homes

Homes are getting bigger. According to the Canadian Mortgage and Housing Corporation, homes have almost tripled in size from an average of 800 square feet in 1950, to 2,300 square feet in 2005. These days, homes average around 1,900 square feet.

Your home insurance is not based on your house’s market value. It is based on the cost of rebuilding and replacing your house. Basically, the bigger the home, the higher the replacement value which in turn translates to higher insurance premiums as well.

In addition, many people are now installing more high-end fittings. The current trend in granite countertops, for example, costs much more to replace than the old types of countertops.

3.    More Contents

The same goes for contents. Bigger homes often require more furnishings. Add to this the popularity of big ticket items such as media equipment, wine cellars, and finished basements, then your contents are going to cost more to replace, so your insurance is going to cost more as well. It is not uncommon for people to have more than one television and more than one computer, laptop or tablet, and top of the line appliances and household furnishings that all add up.

4.    Finished Basements

Finished basements are actually a relatively new phenomenon. It used to be that basements were a place for laundry or pantry storage, but now basements operate as extensions of our living spaces. People are putting more money than ever into their basements. HGTV quotes the average basement remodel at $61,303. This adds value to a home. It also makes basements and the contents more expensive to replace/repair in the event of a claim.

Basements are actually a large contributor to home insurance claims, as water damage can ruin media and entertainment rooms, expensive flooring, and even living spaces. Homeowners are advised to take action against basement flooding by installing sump pumps and taking other precautions to minimize risk, such as not storing expensive technology close to the floor. If you plan to finish your basement, make sure you address all problems with moisture first.

5.    Old Infrastructure

Aging infrastructure is an increasing problem contributing to sewage back-ups and basement flooding. Robert Tremblay, research director at the Insurance Bureau of Canada, told the Globe & Mail that claims for sewage back-ups have doubled in the past 11 years, something insurance companies are now factoring into their risk assessments. The Canadian government has committed to putting $53 billion into infrastructure over the next 10 years, but in the meantime sewage back-up is still a risk for homeowners across the country.

Homeowners should note that sewage back-up protection isn’t automatically included in a home or tenants insurance policy. It is actually an add-on offered by many insurance companies for an extra cost.

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  • Sandy

    Why are homeowners in low risk areas having to subsidize those who live in high risk areas. My house isn’t on a flood plain and in a new area with new infrastructure. I resent this fact that my insurance through no fault of my own went up a fair amount with

    ridiculous mandatory deductibles for water damage.

  • mcvane

    Besides being obligated to have insurance, what is the point in a lot of instances? Deductables are now $1000 or higher ($2000 for any water damage to our property now), so it’s not worth putting a claim through because if you do and you are ‘claims free’ they will still ding you the following year for making that claim. When the cost of home insurance passes the cost of car insurance, you know there is a bit of gauging happening – and the Insurance Companies are making billions – don’t let all these reports of floods/claims fool you…

  • Robert Gerus

    Well it’s this way if my insurance company try’s to stick me with this crap of winter blue’s because Bill down the road didn’t have the right coverage and my insurance want’s me to pay more, screw that, time to look elseware for insurance, I have tenent insurance so hopefully it’s not going to cost a hell of a lot more and I have never made a claim yet.

  • Kevin

    Well, Sandy and Robert, in an over-simplified, nutshell explanation, the premiums of the many pay for the claims of the few. But if the low risk didn’t subsidize the high risk to some degree, the high risk’s rates would be so high, they might choose not to have insurance, then you have fewer people paying insurance, so the low risk’s rates would have to go up anyway.

    To lower the price of property insurance (home, condo, tenants, etc.), you can opt for higher deductibles, put a cap on your sewer backup limit (apparently the average payout for such claims is $20,000-25,000, but do your own research), consider Broad coverage vs. Comprehensive (you could also look at Standard coverage, but I generally don’t recommend it). Also make sure you know what discounts are available from your insurer so you can get all you qualify for.

    As a further note about sewer back, many, if not all insurers, break down their rates for that particular coverage into territories or zones. If you’re in a low risk area, that portion of your policy is probably considerably lower than for those in high risk areas. You can also look into to installing a sump pump and/or backflow valve for lowered premiums or higher coverage if you’re in riskier areas.

    Your friendly neighbourhood insurance broker.

  • Kevin

    If ‘Bill’ doesn’t have the right coverage, then his claim wouldn’t be paid (or paid in full if he was underinsured).

    Regarding the winter blues, it’s the increased likelihood, based on your area, that you’ll have a claim. It’s also how much your insurer tends to pay out for such claims and in that area; if ‘Bill’, and others in your neighbourhood, have many claims, that could impact your rates as well. This logic applies to all insurance companies; going elsewhere just on that principle is pointless. Look for better rates, coverage, service, etc.

    Tenants insurance tends to be much lower because you’re not insuring the building per se, so weather related issues may not necessarily affect your rates as harshly as a homeowner.

    Your friendly neighbourhood insurance broker.

  • Mag

    Insurance companies use a similar method with car insurance based on where you live. I haven’t made any claims for my car for accidents, speeding tickets, for 30 years. So why should I have to pay higher car insurance premiums based on the area I live in. I didnt cause any accidents in my area. My premiums should be based on my own driving history, not other peoples, and definitely not just because of where I live.I resent that. It is very unfair. Same principle as water damage not caused by me. Charge me as an individual, not grouped with other people.

  • Gordon Mosher

    Should there be a substantial discount to home insurance once the home mortgage is paid in full? If so, how much is it typically? I would imagine that insurance companies would offer discounts since once the relationship with the lender is terminated, so too is the contractual obligation to insure.

  • http://www.insurancehotline.com/ InsuranceHotline.com

    Some insurance companies (not all) will offer roughly a 5% discount for a mortgage free home