5 Things that can impact your home insurance premium
While insurance might feel like just another expense in your home-buying process, it could end up being the most important one. But when it comes to protecting your home and its contents, you’ll notice that not every insurance policy is the same.
Home insurance premiums are calculated based on several factors that aim to determine how likely you are to claim damages or losses in the future. Brokers look at factors of the home like location, construction materials, replacement costs, condition of the structure, and more.
The more factors your home has that pose a potential risk for damages, the more you will be charged to insure it.
If you’re thinking about making an offer on a new home, let us walk you through five features that can impact your insurance premium and tips on how to lower this expense.
1 - Aluminum Wiring
If a home was built between the mid-1960s and late 1970s, it’s possible it uses aluminum wiring, which is now considered an out-of-date and hazardous form of electricity by many insurance companies. When installed and used correctly, aluminum wire can be completely safe, but the concern is that it can easily overheat and lead to fire, causing insurance companies to treat it as a fire hazard and make it more difficult for you to get insurance.
The good news is, if this is a feature in a home you’re trying to insure, you don’t need to do a complete re-wire. One option is to have an electrician pigtail the wires, which fixes the risk of the wires overheating and is an economical solution that keeps insurance companies happy.
2 - Poly-B (Polybutylene) Pipes
Installed in many homes built in the 1980s, this plastic plumbing piping was used as a cheaper alternative to copper. Not long after the rise of its popularity, homes with Poly-B started to experience leaks - often going unnoticed until mold and damage were discovered behind the walls during renovations or inspections.
Historically, the main issue with Poly-B piping has been the fittings used to keep the sections connected - plastic fittings were those prone to cracking and leaking. But there have also been failures due to improper installation, too much heat or stress, and deterioration of the pipes from chlorinated water (which is found in Victoria’s water). As a result, most insurance companies will deny coverage or drastically increase the premium for a house with this kind of plumbing.
If this is a feature of your future home, you can have a plumbing professional swap out the acetate fittings for copper. While this is still a hefty task, you don’t need to repipe your entire home.
3 - Asbestos
Once used as an effective material for home insulation, asbestos is now considered hazardous to human health and linked to the development of lung cancer and other conditions.
When it comes to insuring a home, the big issue with asbestos is when it’s found in the attic in vermiculite, which is another form of insulation used in homes built before 1990. The risk with asbestos contained in vermiculite is that the fibres can easily crumble and break off when the insulation is disturbed. This means the asbestos fibres become airborne and are more likely to be inhaled.
It’s possible that asbestos exists in your home in places you’re unaware of or that you can’t access, which inherently is not an issue for insurance companies. But if you choose to explore and get it tested to confirm its presence in the home, you may face hurdles when negotiating your insurance premiums.
4 - Fire Zones
While getting insurance for fire damage isn’t usually an issue, it’s important to understand your risk when the home you wish to insure is near a common wildfire area.
Most insurance providers in B.C. use the 50km radius rule, which states that if there is an active and uncontained wildfire within a certain radius (usually 50km) of the house, they won’t draft a new policy for you, given that there is a pre-existing risk of damage.
This means that if you write an offer for a home on June 1st and don’t get keys until September 1st, and on August 31st a forest fire breaks out within 50km of the house, you won’t be able to bind a new policy.
Considerations may be made on a case-by-case basis, but it’s still likely that you’ll face an increased premium for an insurer to take on the added risk.
Keep in mind that an inability to insure your new home due to active wildfires can jeopardize other aspects of your property purchase like your mortgage if a lender won't issue the funds because the home is uninsured.
5 - Foundation Type
The type of foundation used on your home can affect your insurance premium, and the state of the foundation could also be taken into consideration.
If your home has a dirt foundation, cinder block, or post-and-pad, it can be tough to even get insurance, as some insurance companies will simply pick and choose which types of construction or foundation they will underwrite. Having a poured foundation type (ie. concrete) will make insuring your home much easier.
You may also be asked about the current state of the foundation, and if there are any signs of erosion or cracking, as this can indicate an increased risk of structural damage to the home.
What else do you need to know?
Especially if this is your first time buying home insurance, it’s important to understand that the insurance company will ask you quite a few questions about the property in order to assess your risk and provide a quote.
But since details like the age of the plumbing and the amperage of the electrical panel probably aren’t facts you have stored to memory, give yourself enough time to review the information you need and consult your listing agent.
To learn more about what you will be asked when insuring a home, check out this list of common underwriting questions.
If you have more questions about insuring your new home, feel free to reach out, and I’d be happy to chat.
– Vince
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