Thinking of buying a home? What are some of the factors that influence how your insurance quote is calculated? Let’s breakdown the basics of home insurance calculation, shed some light on factors that affect home insurance costs in Ontario and finally, highlight the steps you can take to lower your overall premium.

First, let’s take a look at some of the factors that insurance companies use to calculate the cost of home insurance premiums in Ontario:

1. Location, location, location!

Where you live is one of the biggest determinants to how much you will pay when it comes to home insurance. Insurance companies track claims that have occurred in your neighbourhood based on three factors: the type, the number and the cost of each claim. Insurers use your neighbourhood’s claim history to determine the likelihood of your future claims.

2. Your claims history

In much the same way insurance companies use the claims history of the city and neighbourhood your home is in to determine rates; your personal claims history plays a role in determining your rates as well.

3. Amount of coverage

The old saying “you get what you pay for” applies when purchasing home insurance. If you choose a basic coverage package, your insurance rates will be lower than, say, a more comprehensive package that offers better security in case of unforeseen damages.

4. Not just a home

If you decide to rent a portion of your home, have a home-based business or make significant changes to your home’s structure or its use, you need to inform your insurer so they can adjust your home insurance policy accordingly.

If you’re running a business from home, then you will most likely need a separate policy. You can get an add-on for small businesses or side ventures that you run from your home, but if you run a business from home full-time, then you might need a separate policy to cover the risks of your business appropriately.

5. What’s inside counts

Electrical wiring. The type of electrical wiring your home has and how electricity comes into your home is a consideration to insurers when looking at cost. Aluminum or knob-and-tube wiring increases the risk of fire. Insurers may give you time to remove it or they can inspect it for safety. Breakers are safer than fuses, and you should have at least 100-amp service to avoid overloading and fire.

Age of your roof. The older the roof, the higher the premiums. As a rule, your roof should not be more than 20-years-old.

Plumbing. Homes with copper or plastic piping get better insurance rates because galvanized or lead piping means old plumbing that has a higher risk of cracks and leaks.

Wood stoves. Although most homes do not use this as a primary source of heat anymore, wood-burning stoves do play an important part in your rate determination. As both a fire and carbon monoxide hazard, insurers may need to inspect them if not maintained or installed properly. As a result, having a wood stove can play into the factors that affect your home insurance rate.

Security systems. By investing in a monitored security system and fire alarms, you can not only can decrease your insurance rates, but have peace of mind that in an emergency, help is on the way.

Improvements or additions. Pools or additional structures will raise your rate because of the additional risk or extra property to insure.

6. Replacement cost

One of the more important factors that affect home insurance costs is the rebuild value or replacement cost. Replacement cost is how much it would cost to rebuild your home if it was destroyed. The size of your home and the materials used to build it factor into its replacement cost. As a result, the higher the replacement cost of your home means you will pay more for home insurance.

7. Proximity to fire hydrants

How close the nearest fire hydrant or fire station is to your home is necessary for your insurer to calculate your insurance costs. Why? Because the sooner a fire can be put out, the less it will cost to repair your home. The closer you are, the lower your rates, so consider buying a home that is within 300 metres of a fire hydrant. This will increase the “appeal” of your home to insurers.

There are many other variables that impact your insurance rates, such as: your house frame (i.e. wood or concrete), availability of a garden, any additional endorsements that you need (e.g. jewelry), the size of your insurance deductible, the risk of crime and severe weather damage. The most notable factor is the city in which you live.

Average cost of home insurance in Ontario

According to, the average cost of home insurance in Ontario is $1,250 per year, or just over $100/month, while Ontario tenants pay $210 per year, or approximately f $20/month. Homeowners pay nearly six times as much as tenants to protect their dwellings and contents.

Ontario condo owners pay on average about $345/year for insurance. If you need to make a claim, condo insurance does not work exactly the same way as insurance for detached homes. Your condo association may have a “master” policy in place to cover shared areas. Also, you are usually not held directly responsible for maintaining everything around your unit (like hallways, elevators or the outside walls). For these two reasons, condo insurance is less than insurance for a detached home.

On average, a home valued at under $300,000 generally sees an average home insurance cost in Ontario at around $711 per year. Home insurance is more expensive than renters‘ or condo insurance because it covers the building, not just your personal property or interior of your unit.

It is important to note that the market value of your home does not directly impact what you pay for home insurance. However, your homes value can give you an idea of what you can expect to see in terms of costs. Normally, it’s your home’s rebuild value (replacement value) that you should consider when buying a home insurance policy. Buying home insurance for market value is a mistake because if your house burns down, you still own the property, so only insure for the rebuild value. Your isure broker will be happy to assist you with any of these differentiations! 

How to save on home insurance

Although there are many factors that affect home insurance costs in Ontario, there are also a number of ways to help cut the cost of your insurance premiums, including:

1. Bundle home and auto policies

Consider bundling your insurance policies with the same insurer, as this is one of the best ways to save money on your home insurance. We’ve got everything you need to know about bundling your insurance!

2. Avoid older homes

It’s hard to refute the charm and character of a well-built older home. Just remember that very old homes, while quaint, may contain things that insurance companies find too risky to insure. Outdated fuel tanks, lead piping and 60-amp fuse service can increase your risk of pipe bursts, overloaded electrical boards and/or fires.

3. Raise your deductible

A deductible is the amount you pay towards an insurance claim. Ask your isure broker if raising your deductible would lower your premium. It’s also a good idea to inventory your belongings and confirm you’re not over-insured. Just make sure the deductible is an amount you are prepared to pay at a moment’s notice.

4. Get overland flood coverage

This coverage is essential if your home lies on a flood plain. Check with your isure broker if you are unsure if this applies to your home!

5. Get sewer backup coverage

Install a backwater valve and add this coverage to your policy to avoid having to swim in repair and replacement costs.

6. Consider a home security system

Although you may live in a “safe” neighbourhood, home security systems make you house safer in the eyes of your insurance company. Inquire about what discounts are available if you install one. If you choose not to, you may want to consider separate coverage or “schedules” for the most valuable items in your home.

7. Consider comprehensive coverage

Basic home insurance policies only cover some of the more common perils. “All perils” or comprehensive coverage policies provide all-risks coverage on both the dwelling and the contents.

It’s also important to understand that one size does not fit all with home insurance, and there are several factors that affect home insurance costs in Ontario. When looking to purchase insurance on your new home, looking at a second mortgage, or renovating, be sure to speak with your isure broker to get a comprehensive breakdown of coverages and available discounts.

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