Mystery solved! How property insurance is calculated

Insurance Insights

July 10, 2017

Jessica Gallant | Relationship Manager, Affinity Market Group, TD Insurance Meloche Monnex

Contributed by: Jessica Gallant | Relationship Manager, Affinity Market Group, TD Insurance Meloche Monnex

Insurance companies consider many factors to estimate the likelihood that you will make a claim and what that claim will cost. Here are some of the main things that will affect the cost of your property insurance.

Location, location, location

Where your home is located can make a big difference. Using your postal code, insurance companies can track claims made in that location and use that information to adjust premiums. Based on past experience in your neighborhood, they can determine how likely it is you will need to make a claim. If you live in an area with a high incidence of break-ins or vandalism, for example, your rate will be higher than what you would pay in an area where those things are rare.

Premium tip
Bundle your home and car insurance with TD Insurance.

Emergency services proximity

How close you are to a police station or fire station are indicators used to adjust premiums as well. Because fire is a major concern, it’s an advantage to live near a fire hydrant or a fire station. The closer you are, the better the chances of saving your property in the event of fire. In urban areas, proximity usually isn’t a problem, but in more remote or rural areas, the distance may be greater, which influences the cost of your insurance.

Premium tip
Tell us if you have a fire alarm system, smoke detectors, carbon monoxide detectors or other security features.

Amount and types of coverage

The higher the amount of coverage you purchase, the higher your premium will be. The type of package you choose – gold or platinum – will also affect the cost of your insurance. Insurance coverage for a condo owner will cost more than coverage for a tenant. With a condo, your policy may have to cover your liability exposure for shared or common areas of the structure, which adds to the cost of insuring it. Optional coverage for specific items like a bicycle or jewellery will also mean a higher premium.

Premium tip
Let us know if you’ve paid off your mortgage.

Replacement cost

Your premium is also dependent on the amount required to rebuild your home in the event of a total loss. This includes the cost to rebuild the structure, replace the contents, replace the out buildings and cover additional living expenses. Any renovations can increase the value of your home, but they will also increase the cost to rebuild it.

Premium tip
Maintain your home for the long term to avoid making small claims that will increase your premiums.

Age of building, roof and insured person

As a building ages, the risk associated with it increases and so does the premium. As the overall infrastructure ages, so does the risk of a faulty or leaky pipe and potential for water damage claims increases. Newer homes generally pay lower premiums, and the premium increases as the homes age. However, the effect of the building aging becomes smaller as you make necessary updates and renovations such as roof replacement. It is also important to know that as you age, your capacity to maintain the home may diminish. This means that your home may be at a greater risk for damage, so your premiums may increase.

Heating, electricity and/or a wood stove

Heating, electricity and/or a wood stove in your home may affect your premiums in the following ways:

  • With oil heating, you may have to pay more than you would with a forced-air gas furnace or electric heat.
  • The risk of leaks with oil tanks increases the potential for damage to your property and for environmental hazards. Depending on the age and condition of your oil tank, you may be encouraged to replace it.
  • A variety of factors associated with your electrical system can affect the risk of fire and, with it, the cost of insuring your property. Breakers pose less of a risk than fuses. If the flow of electricity into your home is less than 100 amps, it increases the risk of overloading and fire. Older types of wiring can also raise the level of risk, particularly if the wiring has deteriorated.
  • Wood stoves can pose an increased risk of fire. Older models are a common source of house fires and carbon monoxide poisoning, especially if they have not been correctly installed or maintained.

Premium tip
If you choose a higher deductible, your insurance company may reduce your premium.

Finished basements

Basements are no longer used primarily for storage and laundry. As homeowners look for more living space, many more basements are finished and used for entertainment and recreational purposes, often with expensive furnishings and equipment (which make for more expensive claims). As such, having a finished basement will lead to an increase in the amount of insurance. Although it is true that having a finished basement will likely increase the premium, it is important to ensure we have the most accurate information in the event a claim occurs. Customers do not always think to call us when they finish their basement.

Need more information?

As a trusted partner of the Alberta Medical Association for over 30 years, TD Insurance Meloche Monnex is dedicated to helping members get access to preferred rates and dedicated advisors who are committed to helping you choose quality insurance products.

For more information, please contact one of our analysts by calling the AMA direct line toll-free at 1.844.859.6566 or visit

The AMA advances patient-centered, quality care by advocating for and supporting physician leadership and wellness.