Insurance is all about risk management. To figure out the premium for a particular insurance product, insurance companies have to determine how likely it is that something will occur that would cause them to have to pay out. They then have to determine how much they would have to pay out. We can say, then that risk is probability x severity.
Your home insurance premium, then, is calculated by evaluating all kinds of risks. Though those calculations can be quite complex, there are generally three main factors involved in determining home insurance premiums:
- Where you live
- The condition of your home
- The type of insurance you’ve purchased
Where You Live
Your home’s location plays a significant role in determining your premiums. Neighbourhoods with a high likelihood of arson, vandalism, and break-ins are going to have higher premiums – as probability goes up, risk goes up. Conversely, if you live near a fire station, your risk decreases, because the likelihood of severe fire damage goes down – time is of the essence with house fires.
The Condition of Your Home
There are so many variables here that it’s almost impossible to list them all. First, look at your home’s age. Older homes are likely to be more expensive to insure. They might have older, more flammable insulation, knob-and-tube wiring, and lower quality building materials. All of these things can increase the risk of fire. Fire is often considered the most severe risk, since it can destroy your entire home and all of your valuables. The higher your risk of fire, the higher your premiums.
You’ll also want to look at your home’s heating system. Oil heating and wood stoves increase your risk of fire. Opt for electric or gas heating when you can.
Your basement may also affect your home insurance costs, but not in the way you think. When your basement is finished, your insurance costs may increase. This occurs, in part, because your home becomes more valuable, and more expensive homes necessarily have higher insurance (any loss to a more expensive home is itself more expensive, and thus more severe). You’ll also see an increase in cost if you purchase insurance that covers basement flooding, as flood damage to finished basements could be much more expensive to repair than unfinished ones.
The Type of Insurance You’ve Purchased
More coverage means more risk to insurers, and that means more premiums. In the same vein, you might change your deductible to change your premium. A lower deductible means a higher premium, and vice versa.
There are a number of other factors that might influence your premiums. These factors include your claims history, who you’re insured with, if you have a Burglar Alarm, and more.
Your Winnipeg home insurance broker is here to help you find the best rates. A lot of people don’t realize that brokers actually look through insurance plans provided by several different companies – it’s their job to find you the best one, based on your particular coverage needs.