Demystifying Home Insurance Rates

Demystifying Home Insurance Rates

A home is one of the largest financial commitments a person will make (not to mention the most important and valued possession for most Canadians), so you’ll want to make sure it is properly protected and that you get the full benefits of your coverage if and when you need it most. The best way to protect your home and everything inside of it, is to get a better understanding of what home insurance covers, how it’s calculated, and what options may be available to you.

To help us get a better understanding of how home insurance rates are determined, we spoke with Daniel Oh, Pricing Director for Allstate Canada. His team looks at data and information, such as claims histories and trends, to help properly manage and plan for future claims activity and what Allstate will need to collect in payments to ensure all our property insurance customers are well protected. Here’s what we learned.

How home insurance rates are calculated

Similar to auto insurance, there are many factors that go into determining home insurance rates. However, because every home and every homeowner is unique, so too is every home insurance policy. Some general factors include:

The value of property to be covered

This is the most important factor in determining your home insurance policy coverage. The amount of coverage you’ll need depends on how much it would cost to rebuild the home, and of course, the value of the personal belongings inside the home.

It is important to insure your home for what it would cost to rebuild, of the same quality, if it were to be destroyed. This amount is called the “replacement value,” and it differs from the market and municipal tax assessment values of your home.

Typically, a standard insurance policy will cover your personal belongings up to an amount that is between 50 to 75 per cent of the amount of insurance you have on the structure. The percentage will vary by insurer. If your possessions are valued at higher than that amount, you may want to consider getting additional coverage.

Creating and maintaining an inventory of your home’s contents (and keeping relevant receipts and appraisals in a safe place) will not only help you determine the amount of property coverage you need to cover all your belongings, but it will also help expedite a claim should you ever experience a loss.

Without an accurate assessment of the value of your home and personal possessions, it’s hard to know if you have enough coverage, even if you have an insurance policy in place.

Type of home

Apartments, condominiums, semi-detached, and detached homes are each considered separately because of size and usage. Will your home be used as a single, or multiple family dwelling? Perhaps it’s a seasonal residence. The construction material (brick, cement, etc.) will also be considered.

Home features

Is there a pool or hot tub? How about a finished basement or a wood-burning fireplace? Maybe you’ve installed a complete home security system or back-water valve. These special features can factor into your rates.

Age of home and maintenance

Older homes that haven’t been upgraded to modern standards will be more expensive to insure because they hold greater risks. It’s even possible that some older features will make your home difficult to insure with many companies unless upgrades are made. Electricity, wiring, sources of heat, the condition of the foundation, and the roof are all important considerations. Proper home maintenance is key. Some upgrades, services, and enhancements may even help lower rates, such as getting a discount for making “smart home” upgrades or subscribing to home monitoring services.


Some neighbourhoods have higher theft rates or are in low-lying areas with a greater likelihood of flooding and sewer backups. Other areas are at higher risk of wildfires, tornadoes, high winds, and hail storms. If you live in an area more prone to these exposures, your rates will be higher than if you live in an area where these incidents are less frequent.

If your home is located closer to a fire station or even a fire hydrant, you could save money as the chances of saving your property in the event of a fire are much better. In urban areas, proximity to fire stations and hydrants isn’t usually an issue, but in more remote or rural areas, the distance may be greater.

Use of home

How a homeowner uses their home can affect insurance costs. Do you operate a business out of your home? Are you renting out a room or an apartment? Or are you using it as a short-term rental? Be open with your agent on how your home is used so they can talk to you about getting the right coverage.

The owner

The homeowner’s claim history will also factor into rates. Homeowners who have had no claims or fewer claims in the past will typically pay less for insurance than those who have more claims. All insurers have to consider your level of risk. People who have had more claims are usually considered a higher risk, and therefore pay more up front.

Chosen coverages

The type of policy you choose will affect your premiums too. Some policies only cover the home against certain perils (like fire). This means if the cause of the damage isn’t listed in the policy, it isn’t covered. Depending on your needs, you may also want to consider a policy with more coverage available in the event of a loss and additional coverage for valuable items that exceed standard policy limits.


Emerging market trends, such as the increasing number of severe weather events we are seeing across the country and the rise in costs associated with insurance fraud, can also affect insurance rates. When claim frequencies and costs go up, insurance companies need to increase rates to cover growing costs.

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Ways to save on home insurance

In addition to the tips provided throughout this article, consider other options for savings, including:

Taking the time to consult an insurance professional is the best way for homeowners to determine what coverage they need. The important thing to remember is that the more accurate you are with your agent or broker when talking about your protection needs and concerns, the more accurate your rate and discounts are – which means you’ll be properly covered in case the unexpected happens.

  • Bundling coverage: if you are currently insured with two different companies for your home and auto, look into consolidating the policies under one insurance provider as many offer bundle discounts.
  • Raising deductibles: While a lower deductible will mean you will pay less out-of-pocket at the time of a claim, it usually also translates to higher insurance rates. A higher deductible will require more cash from you at the time of a claim, but will typically help lower insurance rates.
  • Exploring discounts: many insurers offer discounts on insurance rates for meeting certain criteria, such as if the home has a working monitoring system. If the homeowner is a member or employed with a particular organization, there could be a group discount available.

Want to know more? Learn how auto insurance rates are calculated.

article original published October, 2017