Whether you’re looking for home insurance for your first home or shopping around before your current policy renews knowledge is power when it comes to getting the coverage you need at a good price. Understanding your insurance andhow premiums are calculatedis valuable.
Not only is home insurance required by mortgage lenders it’s also a line of defence in the event of damage or loss to your home by relieving some of the financial burden. But insurance can be confusing and there are many companies selling home insurance in Canada and not all policies are equal. So here are 10 things you need to know when getting home insurance quotes.
1. There are different types of home insurance.
Home insurance usually comes in three types:
- basic
- broad
- comprehensive
Each type offers a different extent of coverage such as what types of damage are covered the amount paid out in the event of a claim and add-ons.
Basic coverage works for people who want to save a bit of cash up front. However it only covers loss or damage claims fornamed perils—a chance event that must be listed on your policy for it to be covered.
Broad homeowner’s insurance provides all risk insurance—so your home is protected from many unexpected and accidental events—but only named perils for your belongings.
The most inclusive package is the comprehensive coverage which protects your home and your belongings from all risks except where specifically excluded on your policy. This is the most common type sold by insurance brokers. We recommend this coverage to adequately protect your home and belongings.
2. What does home insurance cover?
- loss or damage to your home and most structures (like garages and sheds)
- loss or damage to your personal property (clothing furniture et cetera)
- additional living expenses (should you be temporarily unable to live at home due to a covered claim like a fire)
- legal liability coverage (protects you from lawsuits)
The extent of this coverage will vary depending on the type of insurance you choose and if you choose to add on coverage or extensions.
3. Several factors determine the cost of your home insurance.
Every insurance company in Canada will examine and analyzea series of factorsto determine what premium to charge you for home insurance. Some of the factors used include:
There are more factors of course and each insurance company has a slightly different way of measuring risk.
4. You can reduce your premiums.
There are effective ways of reducing your annual home insurance costs without having to reduce your coverage. For instance allow your insurer to perform a credit check because “Insurers believe people who manage their credit well are less likely to burn them with a big claim ��? explainsRob Carrick the Globe and Mail personal finance columnist.
Another option is to increase your deductible. A deductible is the portion of a claim you pay before the insurance coverage kicks in and pays the rest. The higher the deductible the more you have to pay out before your insurance kicks in. Typical deductibles are $500 $1 000 or $2 500. When making this decision be sure that you will have the money in the bank to cover the deductible.
5. Seek out discounts.
Want to reduce your home insurance costs even further? Then look for discounts. If you were considering installing a monitored alarm system then be sure to tell your broker as this could easily translate into a 5% or 10% discount on your annual premiums.
If you’re a non-smoker and have monitored (otherwise known as central) fire alarms installed in your home make sure your broker knows that as well as it can mean additional savings on your premiums.
Talk to your brokerabout discounts available to you.
6. Look into bundling your insurance policies.
Considerbundlingyour insurance for extra discounts (and other benefits). By moving your car cottage and home insurance to one company you can save significantly. Many insurance companies offer discounts to customers that have more than one policy with them — you can expect a 5% to 20% discount depending on what and how much insurance you bundle with your insurance provider.
7. Insure the right amount.
Most people underestimate how much it would cost to replace all their belongings. But some homeowners are also paying for too much coverage. The best way to know how much you need is to take stock. Bydocumenting what you own—either by keeping receipts or keeping a log—you’ll know exactly what it will cost to replace your personal items. Just keep in mind that you’ll need to include everything in this list: from clothes to appliances to pantry items to goods that are stored and used only once per year. An advantage to documenting is that you can ask your independent insurance broker if you’re paying too much or don’t have enough to coverage to cover your belongings and then ask for policies that can tailor to your needs.
8. Payment options.
Want to reduce or eliminate the fees associated with your insurance premiums? Consider paying annually instead of monthly. Most insurance providers will charge extra administrative fees for monthly payments fees you eliminate if you pay your premiums annually.
You can pay in a variety of methods including auto payments.
9. Don’t switch insurance companies mid-year.
If youcancel your insurance coveragemidway through your policy year you could be hit with a cancellation penalty. To avoid this charge be sure to wait until renewal time before switching insurance providers.
As well many insurance companies are now providing loyalty discounts so if you stay with them for 5 years for example you may be eligible for a reduced rate.
10. Shop around.
These days everyone wants to jump online and get an insurance quote—and there’s plenty of companies quoting online but don’t limit your comparison shopping to just the computer. “I tried a couple of sites and wasn’t impressed at the way they seemed to be designed to generate sales leads for insurers rather than give homeowners a broad survey of the costs and options available ��? explained Globe and Mail personal finance columnist Rob Carrick. As such consider using the online quotes as a guide and thencall your independent insurance broker.
Keep in mind that online quotes may not be totally accurate – they often don’t know the whole story. The price you actually end up with can be very different.
The challenge in comparison shopping when you’re looking for home insurance quotes is that this type of coverage is not standardized in a way that allows for quick and easy comparisons. That’s where a broker can help. Bytalking to your brokerabout the coverage you need they can help find the right policy at the right price.
