|
Home Insurance
Home and Tenant Insurance
Buying a home will probably be the largest single financial investment
you will ever make. For most people, their home is their life savings
tied up in bricks and mortar – bricks and mortar that, no matter how
well built, are vulnerable to fire, theft and other disasters.
Could you possibly afford to replace absolutely everything you own?
Recovering from even a partial loss, like having your home broken into
and many possessions stolen, would cost more than most people could
manage on their own. Home insurance is there to protect you from having
to pay out a huge amount at once, often at the very worst time
emotionally.
As
a tenant, you may have even more to lose. If you don’t have insurance
and your actions (for example, leaving the bathtub running) caused
damage to your, or your neighbours, apartment or the apartment building
itself, you would be held financially responsible for the cost of
repairs to the structure, and of replacing the damaged property of your
neighbours. The resulting claims would be paid by the landlord’s and
your neighbours’ insurance…but their insurance companies will come to
you to recover their costs. Tenant insurance is there to protect you
from having to cover these costs out of your own pocket.
If
you are like most people, you will probably never need to submit an
insurance claim. But home (or tenant) insurance is peace of mind that
you really shouldn’t live without
How Home Insurance Rates are Calculated
Like all insurance premiums, how much you pay for home insurance depends
on a number of factors related to risk. Insurers analyze these risks,
and figure out how likely it is that you — or a group of people with the
same set of circumstances — will make a claim, and how much that claim
will cost.
Some of the factors used to determine the cost of
home insurance include:
-
Where you live:
Insurers keep records about such things as the number, type and cost
of claims by neighbourhood. They can tell from past experience what
the circumstances are in your neighbourhood, and how likely it is
that you will have to make a claim. For example, if you live in an
area where most people commute to work and homes are left unoccupied
during the day, the statistics may show your neighbourhood has more
break-ins. The cost of home insurance, therefore, varies from
neighbourhood to neighbourhood, from city to countryside, and is
based on knowledge and experience.
-
Proximity to water:
Insurers are concerned about fire, and will look at how far your
home is from a source of water (e.g., fire hydrant, fire station) If
you live in an urban area, this is generally not a problem. If you
live in the country and the distance is great, however, this will
influence the cost of your home insurance. The sooner a fire can be
put out, the lower the cost of restoring your home.
-
Replacement cost:
The factor that will make the biggest difference in the cost of your
home insurance is simply the size and composition of your house – as
well as your contents. The larger the house and the more contents
you have, the more it will cost to replace. In addition to the
square footage, insurers will take into account such things as the
quality of construction used to build your original house, as that
can vary greatly from home to home.
-
Heating:
Because oil tanks have the potential for causing costly
environmental hazards, your insurance representative will ask you
lots of questions about the age and condition of your tank. There is
far less risk with forced-air gas furnaces or electric heat, so you
may pay more for your home insurance if your home is heated by oil.
-
Electricity:
There are several factors concerning electricity. Do you have
breakers or fuses? What is the flow of electricity coming into your
house, i.e., the "amp"? And what kind of wiring do you have?
Insurers know from experience that breakers pose less risk than
fuses, and that a minimum of 100-amp service is better than a lower
level of service, as a lower amp can lead to overloading and fire.
They also know that some older types of wiring, such as
knob-and-tube or aluminum, can increase the chance of fire,
especially if the wiring has deteriorated or been damaged during
renovations. Some insurance companies may ask for a guarantee that a
home does not have this kind of wiring; some may give you time to
have it removed; while others may ask to inspect the condition of
the wiring to ensure it’s safe.
-
Pipes:
Galvanized or lead piping usually means that the plumbing is older,
and older plumbing is more likely to crack, leak or run into other
problems. Insurance companies generally prefer homes where the
plumbing has been upgraded to copper or plastic.
-
Wood stoves:
These are a common source of house fires and carbon-monoxide
poisoning, particularly if they are not properly installed and
maintained. Insurance companies may want to inspect such
installations. Consult your insurance representative before buying
or renting a home with a wood-burning stove, or before installing
one.
-
Age of roof:
Insurers generally prefer it if your roof has been updated within
the last 20 years. Some policies will pay only depreciated values,
as low as 25% of the replacement cost, for damaged roofs that are
near the end of their designated service life.
-
Other uses of your home:
Insurers will want to know if you have built or are planning to
build a rental apartment into your home; begin operating a business
there; or make any other significant alterations to the structure or
the way your home is used.
-
Other factors:
Insurers will ask if you have a security alarm and a fire alarm, and
whether they are monitored by an outside service. They will also
want to know if you have a swimming pool and other structures on
your property, such as pool houses or storage sheds, that are worth
more than 10% of the insured value of your home.
Basic or full coverage
Once all of the above is taken into consideration, you get to choose the
types of coverage you’d like – which will also influence the cost you
pay. While there are government regulations dictating how much insurance
drivers must have, there are no such laws when it comes to home
insurance. The only requirement may be one set by your bank or mortgage
holder. From there, it’s up to you to decide whether you prefer basic or
more comprehensive coverage. And this is something your independent
insurance representative can help you with.
Insurance Bureau of Canada |
