Home Insurance Premiums: What Factors Play a Role in the Rates?

Posted on June 28, 2019

The average cost of home insurance in Canada is about $850, though the actual cost that you will pay depends on a whole host of different factors relating to your property. Being aware of the different variables that insurance companies use to determine what your home insurance premiums are can help you figure out the steps that you can take to reduce them, saving you money each month while still financially protecting your home from damage.

Home Insurance Premiums are Influenced by Past Claims

While all the following points have to do with the physical variables of your home, one of the leading reasons for a higher home insurance premium is because of past claims. While each insurance provider will have a different way of calculating the impact of past claims, the overall cost that they incur, and their cause are the two most important factors.

For example, a burglary can indicate that your home is in an unsafe area, whereas a tornado or flood can indicate larger-scale damage that has no bearing on your home specifically (though still being quite costly).

This is not to say that you shouldn’t file a claim in the event of damage or burglary, but that you should prioritize serious claims over small one. You may find that the increase in your home insurance premiums over claiming a single broken window, for example, may cost more than replacing the window out of pocket.


Your postal code plays a huge role in determining your home insurance premiums. While you can’t see the differences between areas exactly, an area that has suffered from more break-ins, flooding, and other issues will come with higher premiums.

While there is little you can do about the location of the house that you are already living in, asking realtors and previous tenants about home insurance rates in the area is a good thing to do if you are currently looking to move into a new area.

You should also pay attention to whether a property is close to certain things. Being near a police or fire station will usually reflect positively on your rates since there is a reduced risk of crime or fire.

If you live in an urban area, your local police likely collect data on crime rates that you can access easily online to check your new neighborhood. For example, the Toronto Police Service offers several different maps that you can use to explore the city.

Alarm Systems

Whether or not you have installed an alarm system in your home can play a role in determining your premiums. As mentioned above, insurance companies increase your monthly payments if the area you live in has a high crime rate, but installing an alarm system makes you less likely to file a claim in their eyes since potential burglars will be discouraged from entering – or caught before they can steal anything of value.

Age of Electrical Wiring

In general, the older your home is, the higher the home insurance premiums will be, because the wiring within the property is not in compliance with modern building codes and may be at greater risk of starting an electrical fire as a result.

In order to improve the safety of your home while also reducing your monthly premium, you can have your home rewired, and older outlets, switches, and faceplates which are showing signs of wear or damaged replaced.

You may also want to replace your electrical panel: older panels have fuses which blow when overloaded, which are not as effective or safe as modern breakers which can blow and reset multiple times.

Age of the Plumbing

Likewise, the age of your plumbing plays a role in determining your monthly insurance premiums. Older plumbing, especially galvanized steel pipes, have the potential to corrode and break as they age, which can lead to substantial amounts of interior water damage.

Beyond the water damage that a broken pipe can cause, rust in your water can damage your appliances, be unsafe to drink, and can prevent your laundry machine or dishwasher from cleaning properly.

Replacing old plumbing with modern materials that do not rust or easily break, like PVC or copper, will not only reduce your monthly insurance premiums, but also improve the quality of your home’s water supply.

The Type of Heating System You Use

Another factor that can play a role in increasing your home insurance premiums is the fuel source of your heating system. In 2011, natural gas heated 50% of all homes in Canada, compared to 39% of homes that made use of electric heating systems.

Forced air furnaces, radiators, baseboard heaters and other systems that use electricity to heat your home won’t increase your premiums, but systems that burn natural gas, propane, or other fuels will.

This is because burning fuel in your home carries a few risks – even a wood pellet stove carries the risks of a fire or smoke damage spreading throughout your home. Natural gas, propane, and other nonrenewable fuels carry a small but real risk of leaks and explosions. Consider switching to an electric system to reduce that risk and lower your premiums.

Of course, there are other fire risks in your home beyond your heating system, which you should take steps to prevent. A house fire will cause your home insurance premiums to skyrocket, beyond the actual damage that it causes.

The Condition of Your Roof

An additional prime factor that insurance companies use to determine the size of your premiums is the age of your roof. Your roof acts as the first line of defense against potential interior water damage, which can lead to rotting, mold growth, and all sorts of other damages that are expensive to repair.

This means that you should consider replacing your roof – but how often depends on the type of roofing material that you have. For example, regular asphalt shingles can last anywhere from 15 to 30 years, depending on their quality, how well they were installed, and their surrounding climate, while metal panel or clay tile roofs regularly last upwards of 30 years before requiring replacement.

There’s no point replacing an older roof that has not sprung a leak or otherwise suffered damage, but you should always be completing maintenance and upkeep on your roof to prevent such problems from developing in the future.

You may want to have roofing inspections done every few years to verify the structural integrity of your roof: providing the results of these inspections, as well as any bills associated with maintenance and repair, to your insurance agent can either reduce your existing premiums or prevent them from rising as your roof ages.

Deductible Size

The deductible indicates what you pay if you file a claim. For example, if your deductible is $1,000, and you file a claim for damages totaling $5,000, you would have to pay the first $1,000 and then the insurance company would pay out $4,000.

While increasing your deductible can decrease your monthly premiums, it also leaves you on the hook for more money if your home is damaged. If your premiums decrease by a substantial amount each month, they can eventually save you more money than the deductible increase – but only if you do not make a claim.

Always talk to your agent to see what sort of savings you’d get before you decide to change your policy’s deductible.

The Breadth of Your Coverage

On one hand, it is a good idea to talk to your insurance agent about bundling your different policies with the same company. Often, there is a discount if you have automotive, health and home insurance with the same agency, though the size of that discount will vary.

On the other hand, you should be extremely wary about purchasing insurance coverage that you do not need. While it is a good idea to get home insurance, you don’t need to insure against every single type of potential damage.

There is very little reason to purchase earthquake or volcano insurance if you live in Toronto, for example – and doing so will increase your monthly premiums without giving you much in return.

Finding the Best Rates

If you still want more information about your home insurance premiums, or any other topic relating to home or other types of insurance, you should take a look at our advice database. This will help you reduce your insurance premiums and explain the differences between various types of insurance policies.

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