My Not So Pleasant Home Insurance Renewal

How to get a home insurance renewal

When I received my home insurance renewal letter in the mail last month, I was upset to say the least. I’ve lived in my house for less than a year, but my home insurance premiums have skyrocketed by nearly 23 per cent! I could understand a five per cent increase, but a double-digit hike seems unwarranted and downright excessive. This prompted me to do some digging and find out why my premiums had ballooned by so much, and to see if I could find a better deal elsewhere.

My Current Home Insurance Provider

I was more than happy with my current home insurance provider (until I received my renewal letter), so I decided to give them a second chance. I phoned them for an explanation about why my premiums had increased by so much. The customer service representative explained my premiums went up due to an increase in the replacement cost of my house and the prevalence of natural disasters. When I did the math, I discovered my home’s replacement cost had increased 13 per cent year-over-year.

What is Replacement Cost?

Replacement cost is one of the key factors that determine the insurance premiums you pay. Don’t get your home’s replacement cost mixed up with its market value – this refers expense of bringing your house back to its previous condition with similar materials, without any deduction for depreciation .

Dealing With Natural Disasters

If the recent flooding in Calgary and Toronto are any indicators, it’s safe to say there will be a spike in payouts for weather-related disasters this year (that is if your home insurance policy even covers the damage at all). According to the Insurance Bureau of Canada, insurance companies paid an average of about $1 billion a year in claims for weather disasters from 2009 to 2011, an increase of nearly 500 per cent compared to 2007 and 2008. You’re probably wondering why this matters to you, since you’re only one homeowner. To put it in layman’s terms, the premiums of the many pay for the losses of a few. Since losses from weather have increased dramatically, homeowners are paying for the losses suffered by other unfortunate homeowners through increased premiums.

 Shopping the Market

Apparently double-digit increases are the norm faced by many homeowners today. Rob Carrick of the Globe and Mail was vocal when his home insurance premiums went up by 19 per cent year-over-year – and I can certainly relate to his wrath.

Believe it or not, I found shopping for home insurance a lot more difficult than shopping for a mortgage. With a mortgage you can look for the lender with the lowest interest rate and the most generous prepayment privileges. However, the terms and coverage vary so much between insurance companies that it makes it that much more difficult to comparison shop without reading the fine print of each policy.

Comparing the Market

Since my three per cent new business discount had expired with my current insurance provider, I decided to shop the market to see if I could find a better deal. Online quote comparison websites make it easy to shop around. Simply complete the online form and in less than five minutes you’ll have the lowest quotes from insurance providers.

I’m Staying Put… For Now

After shopping the market I reluctantly renewed with my current home insurance provider. Despite hitting me with a massive increase, their premiums were still lower than the competition.. With the recent weather disasters, I can only imagine how much my premiums will jump next year. Can anyone say 25 or 30 per cent?

If you’re a homeowner it’s important to budget for home insurance premium increases on a yearly basis. If the recent severe weather is any indication, we’re in for massive premium increases for the next few years.


Related Topics

Home Insurance 101 / Home Ownership / Insurance

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