Here’s how you can lower your home insurance costs

Not only have homeowners been faced with rising mortgage rates this year, but they are also considering an increase in home insurance.

According to Statistics Canada’s Consumer Price Index, homeowners’ home and mortgage insurance increased by 8.4% from May 2021 to May 2022. In Ontario specifically, home and mortgage insurance jumped by 8.2%.

Ratehub.ca pegged home insurance in Ontario in March 2022 at $1,408 per year compared to January 2021, when it was around $1,250 per year. The company also estimated that the most expensive premium for a policy was $9,503 and the lowest premium was $446. Ratehub.ca pulled this data from over 2,000 users who compared home insurance quotes.

In a world of rampant inflation, adding higher home insurance rates can seem like “a lot at once,” says Matt Hands, director of insurance at Ratehub.ca.

Landlords may have been disappointed in recent months when they received renewal notices, or they may be surprised if their notices haven’t arrived.

Hands points to building material price increases due to supply chain issues for rising year-over-year rates.

“You see the cost of wood going up astronomically. Apart from service goods and materials, the cost of services and labor has also increased due to supply and demand,” he says. “While insurers don’t care about the market value of your home, they do care about the cost of replacing and rebuilding your home. This is the biggest part of calculating your home insurance policy.

For example, if your house cost $600,000 to build and now costs $750,000, the cost of insurance for it will also increase.

Stefan Tirschler, product and underwriting manager at Square One Insurance, explains that every time a customer submits a claim, the company is exposed to price changes. The pricing of home insurance then begins to increase according to what is paid in claims.

“So if the underlying consumer price index goes up and we know that in 2022 we’ll have to spend 10% more for every stolen laptop we replace for our customers,” he says, ” then our rates must accordingly reflect that to ensure that those funds are available for those claims when we see them coming down the road.

Unlike auto insurance, where in a province like Ontario insurers cannot raise prices without first making a case to the Financial Services Regulatory Authority of Ontario (FSRA), the Home insurance doesn’t have the same level of oversight, Hands says, which makes pricing more buoyant.

Inflation, however, is not the only cause of rising home insurance rates. Natural disasters such as wildfires, floods and tornadoes are becoming more frequent, which also leads to an increase in the volume of claims, says Hands.

“As we continue to see issues with climate change, with the increasing frequency of major storms and other natural disasters, we’re going to see prices increase in general,” Hands says. “So add in inflation, and that’s why we’re really starting to see the market go up.”

In the face of rising prices, there are ways for consumers to lower their insurance premiums.

The first step is to make sure that you evaluate your insurance every year.

“Just shop around to make sure you’re getting the best rate, as there might be rate savings by switching providers,” Hands says.

Homeowners usually receive automatic home insurance renewal notices in the mail, but they can’t compare their coverage to the previous year, or spend a lot of time looking at it, in general, if they have the same coverage for years, says Daniel Goldhar, a broker at Canadian Insurance Brokers Inc.

Goldhar recommends clients contact their brokers at least two weeks before their renewal date so they have time to research the best deal.

And when seeking a quote, homeowners shouldn’t be afraid of a smooth credit check. Insurers usually ask to make one to see what type of client they will accept.

Many people worry that these lax credit checks will negatively impact their credit score, but that’s not the case, Hands says. And, if a potential lender checks your report, they won’t be able to see the indirect credit application.

What the soft credit check will do, however, is show that you are diligent with payments and increase the likelihood that an insurer will offer a lower rate.

“If you don’t consent to the credit check,” says Hands, “you’ll automatically pay the higher rate from the insurer. This could represent a variation of up to 30% in the price you pay. »

Paying attention to what you need in terms of coverage is crucial, says Tirschler.

“The cost of insurance is a factor and people may be tempted to think that if I get a good price for a huge limit that means it’s great value, but it’s not necessarily great value if that limit is always higher than you’re ever going to use, which means you’re always paying a higher price than necessary,” says Tirschler.

Look for clauses or endorsements in your old policy that might be out of date, he adds — maybe you sold an expensive piece of jewelry that you no longer need coverage for, or you replaced the roof, the furnace and hot water tank. Things like this, says Tirschler, can help reduce costs because you’ve reduced the risk of claims.

A common tip for lowering rates is to bundle your home and auto insurance. While this can certainly be a cost advantage, you’ll want to consider your options carefully.

“By itself, that still doesn’t necessarily mean it’s the best overall combination of price and deductible you could get if you strategically placed your policies with separate companies,” says Tirschler.

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