“It’s not every day you get a phone call from your insurance broker saying they have a better home insurance policy for you that will save you money while still being well covered. Luckily, this happened to me a few months back and it got me thinking about how little I know about the home insurance world and if homeowners should be paying closer attention to their insurance situation,” says REALTOR® Nick FitzGibbon.
The real estate agent sat down with Zac Sutherland, VP at Sutherland Insurance, to discuss the biggest factors that influence the cost of home insurance, how the rebuild value of a home is determined and why you’re definitely doing yourself a disservice if you only get one quote.
NF: Where should people start when they’re looking to set up their home insurance?
ZS: Strong advice is the most important factor with any insurance purchase. Home insurance continues to become more complicated in terms of different coverage options available in the market.
I would suggest looking up and calling a local broker who not only has an understanding of the general risks of the area, but also has access to multiple markets to provide a quote for your home.
NF: Can you share a quick breakdown of the different coverage options available?
ZS: A home policy is fairly standard across companies, however each one offers slight variations to the coverages available; this can be the difference in receiving coverage, or not, in a claim scenario.
Each policy should be set up uniquely for your home and your needs. A few coverages I would recommend discussing with your insurance provider to make sure they are on your policy include: Guaranteed Replacement cost, Sewer back-up and Overland water.
Also, one of the biggest misses we see these days are clients not disclosing certain items that are limited on most policies, including: jewelry, bikes and instruments, to name a few. There is a cost to add the proper coverage to certain items, but it is essential to understand that this needs to be done before a claim is made—and not afterwards when it’s too late.
NF: What are some of the biggest factors that will influence the cost of home insurance?
ZS: Your credit score would be the biggest factor in most insurance companies’ rating systems. They also have incredibly detailed flood and water data that will rate the individual homes on their likely exposure to a flood.
The easiest example of this would be that a home at the top of a hill would likely see a lower water-related premium than the neighbour down the hill. Your distance to a fire hydrant determines the rate and for those rural properties it’s the distance to the closest firehall. Another key is the updates to your roof, electrical, plumbing and heating.
Each insurer is different, but a general rule is if these weren’t done in the past 25 years and are not done to current standard code, it will drastically impact your options, which naturally inflates the price. Many insurers refuse to write homes without updates.
NF: How do homeowners determine the rebuild value of their home? Is there a standard rule of thumb or industry recommendation that applies?
ZS: The key difference between insurance valuations and real estate valuations is insurance only looks at the cost to rebuild the existing structure. This is why you will often see a much lower number for your building value on your policy than what you paid for the property. I
n terms of determining that value, all brokers and agents have a valuation tool that given the factors disclosed by the client about the building will help them come back with a replacement cost value. This number is essential to determine the rating and allow the client to qualify for guaranteed replacement cost in certain scenarios.
The easiest way to be comfortable is to be as transparent as possible. Leverage your realtor and the previous owner to get all the answers possible around the year and the materials used to update the roof, electrical, plumbing and heating.
NF: Everyone wants to have ample protection in place, but at the same time they don’t want to overpay. How can homeowners know they’re getting the best rates? What should they be asking?
ZS: As noted above, the key rating metrics have less to do with the home itself. And gone are the days of asking your neighbour what they pay as a reasonable barometer.
Our industry has shifted to what is known as individualized rating, which means they are assessing your individual profile and the home, not just the structure you purchased. Given that, the easiest way to determine if you’re getting the best possible rate is to be transparent and answer as many of the questions as possible, while making sure you are asking to see multiple quotes.
To illustrate this, I ran a quote today on my home. Amongst our seven major providers with identical coverage, the quotes ranged from $1,200 to $3,500, with each company believing they priced my unique situation the right way. If I only got one quote online, who knows where it would have fallen in that range.
NF: Thanks so much for your time, Zac! This was very helpful—lots of great information here for homeowners.
Reach out to talk real estate with Nick Fitzgibbon when you're ready to buy, sell or invest.
Connect with Zac at Sutherland Insurance to discuss the best coverage for you.