Have you recently received the renewal of your home insurance and were shocked by the price. You are not alone. We have seen an increase in property insurance rates over the last couple of years and it doesn’t seem to be slowing down in 2020. So, what are the factors that contribute to an increase in premiums?
1. Hard Market
The insurance industry is currently in what we call a “hard market”. This means insurers are paying out more in claims than would be typical. This forces the industry as a whole to increase rates, in order to stay profitable and payout future claims. This also leads to restricted coverage and in some cases makes it more difficult to find coverage for certain risks.
2. Extreme Weather
One of the main contributing factors to a hard market is extreme weather. We have seen a major increase in severe weather events from coast to coast in the last few years. To put it into perspective, insurers paid out more than $1.9-billion to homeowners and property owners in 2018. Up until the mid-2000s, insurance companies in Canada could expect to pay out $400-million a year in claims due to severe weather. However, now a single event can trigger claims of that size.
3. Construction and New Construction Costs
The cost of new construction and construction materials has steadily increased over the past 10 years. This means that the cost to repair damaged or destroyed property continues to increase. In turn, insurance companies are paying out higher claims.
Not only has the cost of construction significantly increased but we have also seen an increase of new developments. This results in more claims and higher payouts when we have something like a severe weather event.
Ways to reduce costs:
Now that you know some of the reasons why insurance premiums are increasing, is there something you can do to combat those increases without reducing coverage? The answer is yes.
1. Increasing your Deductible
Increasing your deductible could save you 10-20% depending on the deductible chosen and the Insurer
2. Credit Score
A credit score discount is something that is offered by most Insurers. This can result in up to a 20% discount and will not affect your credit rating or policy in a negative way.
3. Updates to your home
Insurance companies are starting to rate risks on an individual basis. So updates to your home like; plumbing, heating, roof, electrical etc. will result in lower premiums.
4. Sewer Back-up and Overland Flooding
Prior to the recent water and flooding issues in Saskatchewan, Sewer Back-up coverage could be added to your policy for as low as $20. Now that same coverage could cost you up to $1,000 or more. This is one of the main contributors to the increase in rates. If you do not have a finished basement or have minimal finishes, you may consider lowering the limit of Sewer-Back-up or Flood coverage to reduce the premium.
5. Re-market your policy
Talk to your Broker about re-marketing your policy. Some Insurance companies may have had an increase on certain risks due to claims, while others may have had a decrease. We recommend re-marketing your policy at least every 3 years.
Unfortunately, as most of us know, costs don’t tend to go down and we are likely to see increases continue, especially with the continuing change in climate and sever weather events. However, just know you are not alone and as your Independent Insurance broker, we work for you. We are committed on finding a policy that best fits your needs.