It isn’t getting any less expensive, either. Between 2011 and 2021, home insurance premiums grew at a pace that exceeded the rate of inflation, according to data from Ratesdotca In Alberta, the cost jumped 140% over that ten-year span, while in Ontario, it grew by 64%.
Suffice it to say, you’re not the only person interested in keeping your home insurance premiums as low as possible. But don’t forget: Home insurance covers your home and personal possessions from damage or loss, and it protects you from liability if someone is injured on your property. In short, it’s not something you want to skimp on.
As with other types of insurance, the goal should be striking a balance between saving money and meeting your all your insurance needs—no more, no less. Thankfully, knowing how insurance companies determine premiums can help you identify potential discounts and what additional coverages you should pass on.
What affects the cost of home insurance?
When shopping for good, affordable home insurance, there are three types of coverage to choose from: comprehensive, broad and basic.
Comprehensive insurance is the most inclusive of these options, covering sudden and accidental occurrences on buildings and personal property, as well as liability. Simply put, this option covers almost everything—with some exclusions specified in your policy. It is also the most expensive option.
Broad coverage comes at a lower cost, offering similar coverage to that of a comprehensive policy but with more exclusions. One of the main differences between broad and comprehensive coverage is that the former only covers your home’s contents for the perils specifically stated in your policy.
Finally, there’s basic home insurance, which covers only perils that are named explicitly in the policy—like fire, wind and theft. As the cheapest home insurance option, a basic policy is intended for home owners who are considered “high-risk” due to things like having a history of unpaid claims, making too many claims or having a home in need of serious repair. There are also limitations on this type of coverage. For instance, you may be protected from a peril like fire, but if your home is vandalized, you won’t be covered.
How home insurance premiums are calculated
For first-time home buyers and long-term owners alike, home insurance premiums are based on a long list of factors, from the age and size of the home to where it’s located. Insurance providers pore over data to come up with a quote based on your unique profile and the level of risk your home represents.
