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High-risk home insurance: the basics.

So, you’ve found the home of your dreams. You’re ready to buy, except for one thing — mainstream insurance companies have deemed either you or your property high risk and won’t sell you a standard policy. And without insurance, you can’t complete your financing.

Homeowners can find themselves in this situation for any number of reasons. Maybe the building they want to insure is exposed to special environmental risks — say, tornadoes or flooding — or it has ancient wiring and plumbing. Insurers may balk at offering traditional coverage because your building will be vacant for long periods of time. Or maybe you’ve had home insurance cancelled in the past due to late or non-payment of premiums.

But don’t despair if any of these factors apply to you. There are companies that specialize in high-risk — or “non-standard” — home insurance. You can expect to pay higher premiums than you would for a regular policy. But at least you have options. Read on to find out if you’re likely to need high-risk coverage and what you can do to help manage your premiums.

 

How to get the cheapest high-risk home insurance quote

Getting insurance for your home is easier than you think. To get the lowest rate possible, the Financial Consumer Agency of Canada recommends following these steps when shopping for home insurance.

Compare home insurance quotes from various providers.

Ask your broker or agent about bundling your home and car insurance policies.

Ask your broker or agent about which discounts you qualify for.

You might be able to further reduce your by increasing your deductible (the amount you pay toward a claim before your insurance kicks in) and by offering to pay your insurance bill annually instead of monthly.

Increasing your deductible is a great way to save on home insurance in the short term, just make sure you have money reserved for this purpose. Focusing on finding cheap quotes isn’t always a good idea. Having the right amount of coverage — now that should always be the goal.

Factors that determine your high-risk home insurance quote

Your home insurance policy will be customized to suit your needs and the property you’re insuring.

Home insurance premiums are determined by dwelling type (is it a single-detached home, a house with a basement tenant suite, or a condo?). Insurance companies also try to predict the kind and size of claim you might make in the future.

Here are some of the criteria insurance companies look at when calculating your premium.

  • The square footage of your home.
  • Contents and quality of construction.
  • The location of your home.
  • Distance to a fire hydrant.
  • Your insurance claims history.
  • The age of your roof.
  • Your home’s plumbing.
  • Your home’s electrical system.

Your questions about high-risk home insurance, answered.

Who needs high-risk home insurance?

You may land in the high-risk category for any number of reasons — it could be due to the condition of the building you want to insure, its location, how often it will be vacant and for how long, as well as your personal history with other insurers. Here’s a rundown on key issues that may affect your status.

Rural properties: Traditional insurers can be reluctant to offer standard coverage to country homes as they are more exposed to risks such as damage from storms or forest fires. Some areas may be deemed prone to flooding or tornadoes. Rural homes are also less likely to have access to fire hydrants.

Older buildings: Outdated systems such as knob-and-tube wiring or galvanized steel plumbing can put your home into the high-risk category. So can outdated building materials. Heritage features may also be more costly to insure as they may require special trades or materials for repairs.

Occupancy: Homes that are not continuously occupied are at greater risk for damage than those that are. No one is monitoring the property on a continuous basis. It could be days or weeks before someone discovers that a pipe has frozen, a squirrel has chewed through wiring, or that batteries in the smoke detector have died.

Absentee landlord: If you live more than 100 kilometres from a property you rent out, you’re insurer will consider you an absentee landlord. That means you’ll probably require high-risk coverage.

Insurance history: Just like your driving record will determine your auto insurance premium, your history with home insurance will be a factor in whether your policy is deemed high risk. Don’t expect welcoming discounts if you’ve had a policy cancelled in the past or have a record of late payments. Having made several claims against earlier policies won’t help your case either, nor will having multiple mortgages on your property.

How to get the best deal on high-risk home insurance?

The main thing you can do to get the best premiums for a high-risk policy is this: shop around. Several brokers specialize in this category of insurance. They can help you determine what level of coverage best suits your specific needs — and where you can find good prices.

Can you get out of the high-risk category or reduce your premiums?

The answer to this question is, “yes” and “no.” Let’s get the bad news out of the way first. If you’re deemed high-risk because of your financial history — poor payment records, cancelled policies, multiple mortgages and so on — there’s not much you can do in the near term. You just need to invest the time it takes to become a better customer.

Likewise, you can’t do much about the location of your property and how that affects your premiums.

But here’s the good news: You can reduce your premiums — maybe even move out of the high-risk category altogether — if you take reasonable steps. Here are some to consider.

Reduce risks: Objects on your property such as dead trees pose risks to your home in a storm. Removing them may have a positive impact on your premium.

Upgrade old systems: If your home has old wiring or outdated plumbing, bringing them up to standard can have a positive impact on your premiums. So can installing new siding and roofing that better protects your home or replacing old oil tanks and furnaces with new, high-efficiency systems.

Be a good customer: Pay your premiums on time or set up automatic payment arrangements with your insurer. Also, don’t make unnecessary claims. These may keep you in the high-risk pool and raise your premiums. If you can fix an issue on your own for little expense, it’s best to take care of it yourself.

Consider a no-frills policy: Say you’ve bought a fixer-upper. If you can find an insurer who’s willing to sell you a very basic policy, you may be able to save money while you complete improvements to your property. A no-frills policy will include features such as repairing fire or storm damage. But it won’t pay for extras such as the costs of accommodations if some event forces you from the home8 (assuming you are able to live in it during the renovation).

Is high-risk home insurance the same as no-frills home insurance?

It’s also worth noting that no-frills is not a general solution to moderating high-risk premiums. It is a different type of policy and should be thought of simply as a potential alternative to a comprehensive policy. It may be useful in certain circumstances, such as the renovation scenario described above, but it may not be a strategy if your high-risk designation is due to other factors. Talk to your agent or broker.

What factors contribute to your home insurance premium?

When insurers calculate your premium, they consider several factors. Here are some key variables.

  • The age and condition of the home.
  • A home’s location relative to emergency services, such as fire hydrants and fire stations.
  • The replacement value of the home. Some people only buy enough coverage to offset their mortgage rather than actually rebuild their property.
  • The size of the deductible. The more you are willing to pay upfront on a claim, the lower your premium will be.
  • Your claims history and credit score. If you have made frequent claims on your policy in the past, expect to pay more in the future. Likewise, if you have a lower credit score or high debt, your insurer may charge a higher premium to offset their risk.
  • The effort you put into shopping around. If you automatically renew your home insurance every year, you may be paying more than you need to. Take the time to compare prices and coverage from various providers when your policy comes up for renewal. If you find a better deal, take it.

How LowestRates.ca can help you find the best rate for your home insurance.

LowestRates.ca gives you quick and easy access to quotes from more than 15 insurance providers so you can comparison shop in comfort. Remember, individual companies have different areas of specialization and tolerances for risk. This leads to different prices for different types of coverage. Shop around to find the best fit and cost for your individual needs.

LowestRates.ca is also a handy source of information to help you understand the insurance industry, trends affecting its prices and what you can do to get the best deal available.

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