Over the last few weeks, the Globe and Mail’s Rob Carrick has written many articles about the increased insurance premiums home owners face year after year. After looking at these articles’ statistics, his argument for government oversight and regulation seems highly agreeable. Currently, Canadians are faced with a 19% increase on home insurance on a year-over-year basis. As Annie Marie Thomas of InsuranceHotline.com suggests, this is a way for insurance companies to transfer the growing claim costs back to home owners. Since home insurance is not mandatory, but does come highly recommended, Rob Carrick and many other financial experts demand that the industry seek alternatives, so that these premium rates stop climbing.
Why Are Home Insurance Premiums Rising?
There are two major factors contributing to the increase of home insurance premiums seen every year:
- Natural Disaster – between 2009 and 2011, the insurance industry paid-out approximately $1-billion on account of some form of weather disaster. This statistic is about nine times higher than reports from previous years
- Building Supplies – besides the time it takes to place skilled tradesmen on repair projects, the cost of building materials has risen by 2.2% this year according to Statistics Canada. In addition, people are filling their homes with more and more things, adding to the coverage cost when and if disaster strikes.
There are a few things that you can do as a home owner to lower your insurance premiums:
- Suggest a credit check – if you have been punctual in the past, chances are the insurance companies see you as a responsible borrow, which may lead to discounts.
- Raise your deductible – although you will pay more if you make a claim, your month-to-month (or annual) fees will be reduced. The higher the deductible, the lower the premium.
- Bundle – f you bring over your car insurance, you will often be rewarded with a premium discount. If you also prove that you are actively protecting your assets (i.e. alarm systems), you’re rate may drop.
- Go for basic – most people choose a full-coverage package when all they really need is the basics. Take the time to look over your plan and ask yourself if you are “over-protected”. Similarly, opt to pay annually instead of monthly to avoid administrative fees.
What You Need to Know
Every home owner should take the time to review their home insurance plan. Before signing or renewing a contract, here are a few things that you should think about:
- Home value – this ties into the point about being “over-protected”. Most insurance companies offer many different packages, and depending on the value of your home, you may be fine with the basic package. Always take into consideration what you are securing.
- Insurance rates differ wherever you go – if you’ve found a cheaper company — great! But before getting too excited, looking into the claims service and the financial stability of the insurer. Additionally, take a look at the long term plan to make sure that rates won’t rise up within a year or two. This is why it may be best if you jump around a bit every year, guaranteeing the lowest possible rate annually.
- Claims – not everything should be claimed. Think carefully before you decide to a report a loss because it may not be worth the premium hike.