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Home insurance is one of the best ways to protect your investment and your family; few products will give you more value for your hard-earned dollars than a homeowners policy. But if you’re wondering how insurance premiums are calculated, you’re not alone.

Whether your current policy is up for renewal or you’re about to close on a new place, there are a few ways to keep your premiums manageable. But first, it’s important to understand which factors can affect your overall rates.


Insurance premiums aren’t always about a home’s physical structure as it is about location. For example, a small townhouse in downtown Toronto could be more expensive to insure than a larger detached home in rural Stouffville. Why? Just think about how much more damage a fire could do in a densely populated area where homes are built close to each other.

Location reveals a lot about the potential risk of your home. Insurance companies are also looking at your home’s proximity to a fire hydrant or fire hall. Location can indicate whether you’re in a high-crime area, too. Your insurance provider will set your premiums higher to account for possible burglary, vandalism and other crime-related claims. It’s good to note that having an alarm system in place can help lower those premiums.

Age of your home

Newer homes can be cheaper to insure — this can be especially true if your property is under 10 years old. The assumption is that newer homes are constructed with modern materials, so they’ll generally have fewer issues.

The state of your roof, for example, is a major cost determinant. The last time your roof was replaced and what materials were used are often questions that insurance companies will want the answer to. Some companies will offer discounts for ‘impact-resistant’ roofing materials like aluminium and steel. Providers will also ask about your electrical system; circuit breakers usually cost less to insure than fuse boxes.

Value of your home

The market value of your property will also affect your premiums. Coverage included in your policy will address the cost to repair or rebuild your home if it’s damaged by a covered peril, and the limits of this coverage is often determined by multiplying the square footage by local construction costs.

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Can you lower your monthly premium?

While home insurance is often thought of a necessary expense, it’s nice to know that you do have the option to lower your monthly premium — with the right choices. Interested in learning how? Read on.

Boost your deductible

If you make a claim, the deductible is the amount you’ll have to pay out of pocket. Increasing this amount can have an immediate impact on your insurance premiums. If you do decide to increase the deductible, remember that you may need to end up paying this amount to have the rest of your damages covered, so be realistic about it; you don’t want to be in a situation where you can’t afford an important repair because you can’t cover your deductible.

Decrease coverage

While it’s important to purchase adequate coverage, there might be certain coverages that you can do without. For example, check if your home’s land value is covered under your policy. If so, consider whether you really need it. You’re more likely to require coverage for your physical home and its contents than for the actual land. Before making changes, ask your insurance provider for advice first.

Take advantage of discounts

When shopping around, look for discounts! You might want to reach out to your auto insurance provider to see if they offer home insurance too — most companies offer a deal when you bundle the two. A good credit score could score you a discount, as well as having a home alarm system in place.

Home insurance is an important part of protecting what you love, and it’s a small investment that can go a long way when you need it the moth. Whether you require insurance on your first home or coverage on the family cottage, finding the right provider and policy is crucial in protecting your most valuable assets.

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