12 Things That Go Into Your Home Insurance Rate

A guide on what affects the premiums you pay for your home insurance policy.

Chances are your home is your biggest investment, and to protect that investment you have home insurance. It’s an essential homeowner purchase. After all, few people would be able to rebuild their home on their own financially if there was a house fire. Or cover the costs of a lawsuit if someone were to trip-and-fall on the stairs leading up to the home’s front door. Home insurance protects not only your home when disaster strikes but your finances as well.

What affects your home insurance rate?

From the roof to the basement to the outdoor living space and the garage, many things do and don't go into your home insurance rate. 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?

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1. The age of the house

Homes with newer electrical, heating, and plumbing systems are often less susceptible to fire and other hazards, which means you're less likely to make a claim. As a result, some insurers offer a ‘new home’ insurance discount, that will lower your premium paid.

2. Replacement cost

A home with pricy finishes (think things like marble, hardwood, and granite) will cost more to insure than a home on the same lot that is built with more modest materials. The same is true for a larger home with more square footage. It all boils down to the replacement value of the home, which is the cost to rebuild your house (with materials of like kind and quality) after a serious loss, like fire.

3. Swimming pools

Swimming pools not only increase the replacement value of your home, but they increase the potential for a liability claim if someone drowns or is injured on your property and you’re subsequently sued.

4. Neighbourhood

Your neighbourhood will factor into your home insurance rate because insurers keep track of where claims are common. If you live in a community that’s susceptible to sewer back-ups, for example, your home insurance rate will reflect the increased likelihood that you may need to submit a claim.

5. Your home insurance claims history

The Insurance Bureau of Canada says, “past claims are often an insurers' best predictor of future claims”. As a result, you could pay higher rates if you have a few claims in your history. But don’t let this notion stop you from ever submitting a claim. As a general rule, a single claim won't flag you as a high-risk.

6. Proximity to fire hydrants and fire stations

Fire hydrants and fire stations are generally numerous and nearby for homeowners who live in an urban area. However, if you live in a rural setting, your premium will be affected by how near, or far, the closest fire hydrant and station are to your home.

7. Electrical wiring

Not shockingly, insurers pay special attention to a home's wiring due to risk of fire. This is especially true in older homes where there could be knob and tube wiring, aluminium wiring, or there’s a fuse box instead of breakers. Insurers are also on the lookout for homes with less than 100-amp electrical service.

8. Plumbing

Old plumbing, like galvanized or lead pipes, are more likely to rust, crack, or corrode than their newer copper or plastic plumbing counterparts. With older plumbing, there’s an increased chance of water damage and an insurance claim which means you’ll likely pay increased premiums.

9. Home heating

Even with proper installation and regular maintenance, fires are more common in homes with a wood stove or fireplace, and your home insurance rates will reflect this reality. Your rates will also be higher if your home is heated primarily by oil. Oil tanks have the potential for causing costly environmental hazards, and your home insurance provider will ask you a lot of questions about the age and condition of your tank.

10. Roofing

Your roof protects your home from the elements, but if it’s older, there’s a greater chance for leaks or other damage. If your roof is well past its prime, you may find it challenging to get the coverage you need without replacing it.

11. A home-based business

Your homeowner's insurance policy is meant to protect your home as a residence, not as a place of business, and when you combine the two, you may be leaving yourself exposed. You can add a home business extension to your current policy, for a fee, to ensure both your home and your business are adequately protected. Without the extension, you’re jeopardizing both.

12. Tenants

Renting out a portion of your home is a great way to offset the high costs of real estate, but it could affect your home insurance premiums. With tenants, your home is no longer a single-family dwelling. Instead, it’s a multi-family property which comes with its own set of risks that will be factored into your home insurance premium.