What’s Impacting Your Home Insurance Rates in Ontario?

The average cost of Ontario home insurance in 2021 was approximately $1,342. In 2022, some experts estimate that premiums may rise around 5%, whereas some companies estimate up to a 10% jump. The reason for this increase can be largely attributed to climate change, which has resulted in an ongoing trend of extreme weather. In the province of Ontario alone, this has led to a startling frequency of tornadoes, flooding, hailstorms, and similar devastating natural calamities.

In addition, supply chain issues for housing supplies, inflation rates, and the increased cost to rebuild homes have also impacted premiums.

As a homeowner, how do you mitigate the increase and continue to keep your home insurance rates as affordable as possible? It helps to know exactly what’s going into calculating your rates and tackling the matter from there. Here are some of the most important factors that are impacting your home insurance rates in Ontario.

Factor One: Insurance History.

Your home insurance rates in Ontario are largely influenced by your claims history. Statistically, those who have made a large number of claims in the past are more likely to make additional claims in the future. Moreover, if you haven’t been insured for very long, insurance companies won’t have a great trend to gauge your risk factor as well, which may negatively impact your premiums. You’ll pay for cheaper rates the fewer claims you’ve had with a considerable and consistent insurance history where you made payments regularly and avoided switching around insurers too much.

Factor Two: Geographical Location.

Your postal code in Ontario will help insurers consider several of the following factors regarding your location: your proximity to large bodies of water, how close you are to a fire station, how often natural disasters occur in your area, crime rates, and the insurance history of your neighbourhood. In Ontario, water is one of the biggest causes of property loss, and as such, places prone to flooding – urban areas, low-lying areas, areas near storm drains, and culverts – may have higher rates.

The less likely your home is to receive help in the case of a disaster, the more your rates will be. Unfortunately, Ontario has seen a high frequency of flooding events in the recent past, so having a home near a large body of water can cause your home to be labelled as high-risk. Crime rates and claim rates also indicate how expensive your insurance will be, as insurers may price much higher rates for a home in a high-crime area than a home in a safer neighbourhood.

Factor Three: Home’s Structure and Roof.

Unlike renter’s insurance, which only insures your property and third-party liability, home insurance’s costs is greatly influenced by another aspect it insures: the total property. An older home may have more issues and be more expensive to repair. Wood buildings are typically more expensive to insure due to the fire hazard they pose. Your home’s roof is also a big factor, seeing as your roof is your home’s main source of protection. An older roof is more likely to fail if something disastrous occurs. If your roof is overdue for a replacement and starting to show its years, you might be charged more for your rates.

Factor Four: Home Systems and Alarms.

The age of your electrical, heating, and plumbing systems will be considered when calculating your overall home insurance rates. Older systems are statistically faultier and, therefore, may cost you more to insure. You may even qualify for a discount on your home insurance by upgrading your home’s systems to their modernized variations! Fire alarms and carbon monoxide detectors also play a part in how much your coverage may cost you and can qualify you for discounts on your rates.

Factor Five: Overall Replacement Cost.

The cost to rebuild a home in Ontario has increased significantly, in part due to supply chain issues, demands for new housing, and the increasing complexity of luxurious homes and smart homes. Your replacement cost is not the same as the purchase price or current market value. Replacement cost is calculated via the amount it would cost to rebuild your home as it stands today, how much it would cost to replace all your belongings, the cost of debris removal in the event of a disaster, and (with the right endorsement) the cost to upgrade your home so that it meets current bylaws.

Factor Six: Credit Score.

Credit score is a lesser-known impact to your overall home insurance rates, but some insurance companies will still take it into account. In most cases, it is up to you whether or not to allow your insurance company to check your credit score. Good credit scores can qualify you for a discount, as it proves you are more likely to pay your premiums on time. Note that this isn’t applicable for every home insurance company in Ontario, but it’s worth asking about.

Factor Seven: Coverage Options.

The level of coverage you choose, what coverage options you purchase, and your overall policy limitations will be a factor in your Ontario home insurance rates. This will also consider your deductible, i.e the amount you must pay out in the event of a claim before your insurance company steps in to pay the remainder. The lower your deductible, the higher your premiums.

The higher the policy limits you choose, the higher your insurance will be as well. Note that policy limits will vary for different parts of your home and will be indicated in your documents. While you might only have a certain limit for contents coverage, the limit to repair or rebuild your home’s structure might be much higher. You may also have a separate limit for additional living expenses, if you were forced to live elsewhere during a period of repairs.

The more extensive your coverage options, the more expensive your insurance will be. Depending on your needs, an insurance broker might recommend different coverage options. If you notice your home insurance rates are increasing, give us a call to see what we can do.