Home insurance rates can seem to be arrived at in a baffling manner. You speak to an insurance company representative, they ask a lot of questions, they plug in all your details, and a number is calculated from a very complicated formula. It’s all a little intimidating, and more than a lot confusing.
At this point, remember the benefits of an insurance broker. We are here to do your shopping for you. We can compare policies from a number of our different providers to ensure you get the best coverage at the best rates.
But it’s still important to know what home insurance entails. The following list is comprised of a number of factors that affect your home insurance rates. Some are based on the type of home you own, some are based on your home’s location, and some are based on personal details.
- The Value of Your Belongings
The value of your belongings makes up a fair chunk of your home insurance rates. You will be asked to choose between actual cash value coverage vs. replacement cost insurance, and your choice will make a difference in your premiums. Replacement cost insurance is more expensive, but it guarantees you will be reimbursed the amount it would take to replace a lost or damaged item. Actual cash value insurance is cheaper, but it also factors in depreciation. This means that if your old and ratty couch is damaged in a fire, you will only receive back a fraction of what it would cost to replace it new.
When people are asked to estimate the value of their belongings, many do exactly that. They estimate, and they tend to low-ball. This is likely because we are all trying to avoid exorbitantly high rates. We stress that underestimating the value of your belongings is a very bad idea. Companies are obligated to go by the parameters of your policy no matter what, so even if you can prove you had $500,000 worth of furniture, clothing, art, and jewelry, you will not receive that amount if you informed your provider differently.
- The Type of Home You Own
Homes that are made out of fire-resistant materials, such as concrete, are cheaper to insure. Unfortunately, however, most stand-alone homes in Calgary are made out of wood. Finished basements will also add to the cost of your home insurance, as basements flood often.
- The Size of Your Home
It should come as no surprise that the larger your home is, the more it will cost to fix it should you have to file a claim. Therefore, larger homes cost more to insure. The estimated cost of rebuilding your home (known as the replacement cost) is a major factor in your home insurance rates. A home appraisal done by a certified professional is a good way to estimate this amount.
- The Condition of Your Roof
Insurance companies love newer roofs in good repair, as roofs are pivotal for the protection of your home. Your roof provides fortification against Alberta’s wild weather, help keep your home warm and cozy in the winter and nice and cool in the summer, direct moisture away from your home, and help mitigate damage from fires.
If your roof is damaged, most policies take into consideration its age and condition before considering reimbursement for a claim. As a general rule, if your roof is more than 10 years old, depreciation value will be factored in, meaning you will be unlikely to receive the full replacement amount should something happen … such as one of Calgary’s epic hail storms.
- Additional Structures on Your Property
The age, size, and type of materials your detached garage, shed, deck, fence, and any other kind of outbuilding are made out of will affect your home insurance rates.
- If You Have a Rental Unit
As renting out part of your home carries some additional liability risk, you will see higher premiums because of it.
- If You Have a Home-Based Business
Home-based businesses are not covered by your home insurance. You must let your insurance company know if you are operating a business out of your home, otherwise your business’s property will not be protected. Some companies do offer a home business endorsement that can be added to your coverage, or you could look into a separate small business insurance policy.
- Crime in Your Neighbourhood
Although it certainly doesn’t seem very fair, if your neighbourhood is often a target for thieves and ne’er-do-wells, that will be reflected in your home insurance rates. Installing a comprehensive home security system will likely help you receive a discount of some sort.
- How Close You Are to Potential Risks
Anyone in Calgary who lives close to a river knows that their home insurance rates are impacted by this fact. It’s unfortunate but true … Calgary is prone to flooding. For many years there was not any kind of overland flooding packages available, but thankfully, there are now enhanced water damage package endorsements that those who live adjacent to a body of water should definitely consider.
- Your Plumbing, Electrical and Heating Systems
Older plumbing, heating and electrical systems greatly impact your home insurance rates. This is because they also greatly increase your chance of having to make a claim. Knob-and-tube wiring is known to cause fires, and lead pipes crack and leak. Getting an upgrade may seem daunting, but it will pay off in the long run. Plus, your home will be safer.
Let Us Review Your Home Insurance
If you signed up for home insurance some time ago – or even if you did it recently – and are unsure exactly what you’re covered for, give the experienced insurance brokers at Lane’s a call at our Calgary, Banff, Edmonton, or greater Alberta offices. We can perform a home insurance review with you to clarify any questions you may have.