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How Home Insurance is Calculated

How Home Insurance is Calculated

Understanding how your home insurance cost is calculated will help you make the right choices for your coverage. Here is how your annual premiums are determined:


The location of your home will be considered as insurance companies keep track of activities and trends in neighbourhoods in order to determine risk. Based on these calculations, they will see what the odds are of you having to make a claim, be it for vandalism, fire or water damage/sewer backup. Where your home is located in relation to fire stations as well as fire hydrants are also considered in the location. The farther you live from a station the more damage that can occur while waiting for firefighters to arrive.

Calculated replacement cost of your home

Premiums for home insurance are based on how much it costs to completely replace the building if totally destroyed. This is different from the market price of your house that you can sell it for. The insurance limit is also based on the type of home you have, the approximate square footage, type of quality of build (high end quality or average) as well as if the basement is completely or partially finished for a few examples.

Type of coverage

The better coverage you have, the more it will cost. Premium packages that include specialty items such as jewellery or even bikes or boats stored in your garage will be far higher than basic coverage just for the home and its furnishings. However, you want to be certain to cover all important aspects of your home and its contents to avoid losses.


Your deductible is the amount you pay in the event of a claim. The higher your deductible, the lower your premiums tend to be.


There are many discounts for home insurance that can drastically affect the price, be sure to speak with your insurance broker to make sure they are applied where applicable. These are typical discounts most insurance companies offer:

  • Claims free discount for having a home/property insurance policy in place for a few years and not making a claim.
  • Alarm discount for having a monitored fire and police protection system
  • Retiree discount
  • First time home buyer discount
  • Multi-policy discount for having your auto and home insurance with the same insurance company

Home Use and Structures

How you use your home such as adding rental units or running a home business will also affect cost. Structural changes or additional structures such as a swimming pool, pool or guest house and storage shed can also raise premiums.

As you can see there are many factors that come into play when calculating the cost of your insurance. If you would like more information about home insurance products, speak with a Rowat insurance broker today.

Rowat Insurance

Insuring Ontario and Quebec since 1955. Trust Rowat Insurance Brokers to look after your home, auto, business and life insurance needs. We always guarantee fast, friendly service and highly competitive premiums. As brokers, we are entirely independent from Insurers and Financial Institutions; we will work with you to analyze and advise on risk, and customize the coverage that is right for you.