Insurance rates for homeowners in Edmonton have been on a noticeable upward trend.
As policyholders face annual increases of 10% to 20%, it’s important to understand the factors driving these costs.
Recognizing the impact of rising expenses, our Edmonton insurance brokers are committed to helping homeowners by providing clear information and personalized insurance solutions that address these challenges.
Let’s take a look at what is driving these prices, from aging homes to increasing claims costs:
The Impact of Aging Homes and Increasing Risk
New homes are typically insured at a lower cost due to compliance with modern building standards and minimal initial risks. However, those costs change as a property ages. As homes get older, their risk factors increase, leading to higher insurance premiums.
New vs. Old Homes
New homes are cheaper to insure because they are built to current code standards, reducing the chance of issues like burst pipes or electrical fires. Most also come with warranties and are built in neighborhoods with modern infrastructure. These factors contribute to lower insurance premiums.
Risk Factors in Aging Homes
As homes age, various components, such as plumbing and electrical systems, begin to deteriorate, increasing the risk of issues like burst pipes and faulty wiring. These elevated risks result in higher insurance costs over time.
Diminishing Discounts Over Time
For new homeowners, insurance brokers offer substantial discounts due to reduced risk factors. However, these discounts diminish as the home ages and its susceptibility to issues increases. The initial discounts disappear, and the increasing risk factors of older homes drive up the costs.
Rising Costs Due to Inflation and Rebuild Costs
Higher insurance rates are also being caused by inflation. Inflation affects not only daily goods but also the rebuilding costs associated with insured homes, influencing overall insurance rates.
Misconceptions About Home Values and Insurance
A common misconception is that older homes should have lower insurance costs. However, insurance is designed to cover the rebuild cost should something happen, which typically increases due to inflation. The cost to rebuild a home includes not just the structure but also debris removal and lot cleanup, which are influenced by inflation.
Inflation and Building Costs
Building costs increase over time. Materials and labor costs rise, which means that the insurance coverage must also increase to cover these higher potential expenses. As the hypothetical cost of rebuilding a new home rises, so does the insurance premium.
Guaranteed Replacement Cost
Guaranteed Replacement Cost is a type of coverage that rebuilds a home to its original state regardless of inflation or price increases in building materials. While beneficial, this coverage often results in higher premiums as it guarantees that the insurance will cover the full rebuild cost.
Climbing Claim Costs: Frequency and Severity
The past decade has seen a spike in the frequency and severity of claims in Alberta, which has affected insurance rates.
Increasing Claims Frequency
More frequent claims have become a trend in the region, driven by aging home infrastructure and increasing severe weather events. High claim frequency results in higher insurance company payouts, which in turn leads to increased premiums for policyholders.
Increasing Claims Severity
The financial impact of claims has also risen, with more severe damage requiring more substantial payouts. Events like major fires, floods, and storms have led to more expensive claims, driving up insurance costs.
Historical Weather-Related Claims Impacting Alberta
Alberta has experienced some of the costliest disasters in Canadian history, including the Fort McMurray wildfires and the Southern Alberta floods.
These events have led to massive insurance payouts, which contribute to rising premiums across the province.
- Fort McMurray Wildfires (May 2016): Destroyed 2,400 homes, with the Insurance Bureau of Canada estimating $3.58 billion in insured damage.
- Southern Alberta Floods (June 2013): Forced over 100,000 people from their homes, with $1.72 billion in insured losses.
- Severe Hailstorm (August 2014): Golf ball-sized hail damaged thousands of properties, resulting in $537 million in losses.
These are merely the notable disasters in Alberta, not accounting for the floods, fires, and extreme weather that are experienced in the province each year.
How to Avoid Rising Home Insurance Costs
Just because home insurance rates are increasing in Edmonton doesn’t mean you can’t save money on insurance costs. Here are some ways that you can manage and potentially reduce your insurance expenses:
Raise Your Deductible
Increasing your deductible can lower your premium costs. While this means higher out-of-pocket expenses in the event of a claim, it can significantly reduce your annual insurance premium.
Review Optional Coverage
Reviewing your coverage options can help you reduce your overall insurance costs. Speaking with an Edmonton insurance broker can help you adequately cover your home without paying for unnecessary add-ons.
Bundle Your Policies
Bundling home and auto insurance can lead to discounts and lower premiums. Many insurance companies offer significant savings for customers who combine multiple policies.
Install Security Systems
Security systems can reduce the risk of burglary and damage, potentially lowering insurance rates. Many insurers offer discounts for homes with monitored alarm systems and other security measures.
Talk to an Expert Insurance Broker
Consulting with an Edmonton insurance broker can provide personalized advice on managing insurance costs effectively. Brokers can help you find the best rates and coverage options tailored to your specific needs.
Lower Your Home Insurance Rates with ARC Insurance
Understanding what contributes to rising home insurance rates can help you make informed decisions about your policies.
If you’re facing increased premiums or are curious about how to better manage your home insurance costs, ARC Insurance is here to help.
With years of industry experience and a commitment to personalized service, we treat your home protection needs with the utmost care.
Our experts are ready to help you understand your insurance options and select the coverage that best suits your needs.
