Why location matters to home insurance rates
Common sense tells us that home insurance rates vary between policies and cities. What might not be common sense though is the seemingly random nature of home insurance rates with regards to the location of a house. Home insurance policies on houses on neighbouring streets can sometimes differ by hundreds of dollars.
Location, location, location
One of the biggest factors in determining your home insurance rates is the location of your house. Houses in the city centre usually have higher insurance rates than houses in the suburbs. This is true due to socioeconomic reasons, and also because of the increased danger of having more foot traffic, the higher crime rates in cities than in the suburbs, and the greater fire hazard posed by having densely packed homes.
City Living isn’t all that bad, though. Generally speaking, houses in the city are smaller than houses found in the suburbs and lower square footage leads to lower insurance costs in some cases. However, it’s not only the size of house you have that affects your home insurance rates, but also the type of house.
What’s more, home insurance rates take into account the cost to replace your house. If you live in a high-cost area, you pay more for home insurance than someone who lives in a low cost area, simply because your house is more expensive to rebuild.
Finally, houses in cities can be closer to fire hydrants and served by bigger fire departments, both of which positively affect home insurance rates. While the suburbs are likely well-serviced by local fire departments, rural homeowners might see significantly higher home insurance rates due to their distance from hydrants and fire halls.
Mother Nature
Mother Nature is a huge participant in setting home insurance rates. Naturally, being located in a high-risk area will lead to higher home insurance rates.
People in Newfoundland for example, have higher home insurance rates than people in Manitoba because of their increased risk of hurricanes. British Columbians are more likely to experience wildfire than Nova Scotians so their home insurance rates will be higher as a result. In the aftermath of Alberta’s 2013 floods, insurance companies began offering overland flood insurance. The additional coverage, designed for homes in low-risk flood zones, ranges from $100 to $5 000 per year. The recent Fort McMurray fires are also likely to have an impact going forward.
Not only should frugal Canadians do their research before settling down in a neighbourhood, but we should also look into insurance costs nationwide to find the province or city that’s best suited to our budget. The wildly variable prices between provinces might make up for having to live far away from your hometown.
Home insurance isn’t cheap, but it’s definitely money well-spent if disaster strikes. Even if you don’t have a mortgage lender requiring you to purchase insurance, having replacement coverage at least stops you from losing the entire value of your house in a fire. If you’re looking to buy a house, make sure you consider the location of the property before you make an offer. While there are some things you can change to lower your insurance after you buy your house, the location is non-negotiable.