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Tue, 15 Apr 2014 13:45:00 GMT | By Gordon Powers, MSN Money

Weather claims push home insurance premiums higher

Rising property insurance costs are prompting consumers to shop around in the hopes of being able to save some money.


Gordon Powers, MSN Money

Regardless of your claims history, expect to pay more for home insurance this year, thanks largely to the severe weather trend that has battered the country.

Widespread flooding in southern Alberta and Ontario last summer, combined with brutal ice storms across much of the country, produced a record $3.2 billion in claims, according to the Insurance Bureau of Canada — triple the annual average for the past five years.

“It's no secret we’re seeing more severe weather, especially more intense rainfall,” says Bill Adams, Insurance Bureau of Canada’s vice-president for Western Canada. “This overburdens our sewer and storm water infrastructure, resulting in more sewer backups in homes and businesses.”

For many Canadians, that water damage — and the risk it could happen again — is causing steep hikes in premiums, higher deductibles and reduced benefits.

Property and casualty insurers warn that as they’re forced to pay out more to cover such damage, policy holders likely face further increases to premiums.

“If there’s a ‘perfect storm’ confronting insurers, it may be the combined effects of climate change, ageing infrastructure, and the increased value of insured property located below grade,” says industry consultant Peter Morris.

Intact Financial Corp., one of Canada's largest property and casualty insurers, estimates their premiums have already jumped by as much as 15 per cent in the face of catastrophic losses and weather-related claims.

One reason is that most homeowner policies now include ‘all-risk’ coverage, including guaranteed replacement costs, thus creating an even bigger gap between existing premiums and the cost of covering significant claims.

Most companies use an evaluation system that considers the square footage of your home, when and how it was constructed, and whether you live in an area that has a record of theft, fire or water-related claims.

But, when it comes to weather and water, at least, insurance companies have been having trouble keeping up.

“If an insurer is able to develop a reliable method for assessing the location-specific risk of water damage and for charging a premium that reflects this risk, that insurer will gain a competitive advantage,” Morris says. “The insurers who are left behind will face the prospect of adverse selection.”

In the interim, finding the right company at the right time may be the best way for homeowners to keep a lid on property insurance costs.

If you’re just starting out, multiplying the value of the house you’re considering by .0025 should give you an idea of what your annual home insurance cost might be — assuming a deductible of $1,000.

On average, Canadians pay $852 annually for their home insurance, according to research from InsurEye, a Vancouver company that provides online analysis to help buyers manage their insurance needs.

The highest average is in British Columbia at $935 annually, followed by Alberta with $912 annually. Homeowners in Ontario come in at $863, and, in Quebec, $769 per year.

The numbers show that home insurance premiums for properties that are owned are much higher than premiums for a rented dwelling. That’s because you're only paying to insure your personal property if you’re a tenant, Insureye notes.

A tenant’s policy protects tablets and sporting goods, while ensuring you’re covered in the event of damage to your apartment or if someone injures themselves in your home. But it doesn’t cover the value of the property itself.

Are you curious as to where you fit and where you might be able to save a bit? Click here to see how much you’re paying compared to your peer group.

Unlike comprehensive comparison tools like InsuranceHotline and Kanetix, where the data comes from insurance companies, InsurEye claims its numbers come from consumers alone.

Since the sample size is limited, however, use the estimates judiciously. From there, it's up to you to contact individual providers if you feel you're being shortchanged or might be able to do better.

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