Understand how home insurance rates are calculated

We just had to post the guest content below written by Sean Murphy. It outlines the basics when it come to insurance calculations in a very concise way. To contact Sean for more information see his link at the bottom of the article. 

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"How are home insurance rates calculated"

There are several factors involved in determining who pays what rate. 

Calculating risk levels 

Insurance rates, often called premiums, are set based on risk, or the potential that someone will make a claim. The greater the risk, the higher the premium. The lower the risk, the lower the premium. To set rates, actuaries study the claims history of groups of people with similar characteristics, and then add information about your particular history to determine the exact premium. 

For example, home insurance rates are based on factors including: 

-whether your neighbourhood is prone to sewer backup 
-the crime rate in your neighbourhood 
-how close you live to a fire station and fire hydrant 
-the value of your personal property 
-your insurance history 
-the claims history of your property 

Federal and Provincial regulations apply 

Government regulations, taxes, and the cost of health care also affect rate calculations; as these costs change, so do premiums. Likewise, changes in court awards, towing fees, repair costs, insurance fraud, and more frequent and severe storms have all influenced rates over time."

 

AUTHOR:Sean Murphy, Associate Insurance Advisor

The Co-operators | Rachel O'Neil Insurance Services Ltd. 591 March Rd. Kanata/Ottawa, ON Tel: (613) 599-7232 Fax: (613) 599-2740 sean_murphy@cooperators.ca