Have you wandering how insurance company calculate your home insurance? Take a look at the article from ResaleHomesAndCondos.ca
How to estimate home insurance premiums
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 calculate 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.
photo credit to Baizana Insurance
THESE FACTORS TYPICALLY AFFECT WHAT YOU PAY FOR HOME INSURANCE:
Where you live Insurers keep records about the number, type and cost of claims by neighbourhood. They can tell from past experience what the circumstances are in your neighburhood, and how likely it is that you wil have to make 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 that your neighbourhood has more break-ins. The cost of home insurace, therefore, varies from one neighbourhood to the next, from city to countryside, and is based on knowlege and experience.
Proximity to water Insurers are concerned about fire, and will look at how far your home is from a source of water (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 wil influence the cost of your home insurance. The sooner a fire can be put out, the lower the cost of restoring - and insuring- 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 home, as well as its contents.The larger the home and the more contents you have, the more it will cost to replace. In addition to the square footage, insurers take into account such matters as the quality of construction used to build your house, which can vary greatly from home to home.
Heating Oil tanks have the protential for casuing costly environmental hazards, so your insurance representative will ask question about the age and condition of your tank. There is far less risk with forcred-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? And what kind of wiring do you have? Insurers know from experience that breakers pose less risk that fuses, and that a minimum of 100-amp service is better than a lower level of serivce, as a lower amp can lead to overloading and fire.
Pipes Galvanized or lead piping usually means that the plumbing is older, and older plumbing is more likely to crack, leak and result in damage. Insurance companies generally prefer homes where the plumbing is made of copper or plastic.
Age of roof Insurers generally prefer a roof that has been updated within the last 20 years. Some policies will pay only depreciated values, as low as 25 per cent 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 secondary rental suite in your home;begin operating a business there; or make any other significant alternations to the structure or the way your home is used.
More factors Insurers will ask if you have a security alarm and a fire alarm, and whether they are monitored by an outside service . They wil also want to know if yuo have a swimming pool and other structures on your property, such as a pool house or storage shed, that are worth more than 10 per cent of the insured value of your home.
Basic or full coverage Once all of the above is taken into consideration, you can choose the types of coverage you'd like -which will also affect the cost of home insurance. While there are government regulations dictating how much insurance coverage 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 is 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.
THE FOLLOWING FACTORS TYPICALLY DO NOT AFFECT WHAT YOU PAY FOR HOME INSURANCE:
Gas verusus electric appliance The Types of appliances in your home do not affect the cost of your home insurance.
Brick exterior versus aluminum siding Most insurance companies do not use type of construction as a rating factor when calculating home insurance premiums. However, construction type is used when calculating the building replacement cost (what it would cost to rebuild the dwelling with materials of like kind and quality, if it were destroyed).
Information provided by the insurance Bureau of Canada. For more information visit ibc.ca
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