# 40% increase in home insurance



## cautiousone (Jun 9, 2009)

My home insurance premium notice arrived this week immediately following a letter from the insurance company justifying a 40% increase over last year. The primary reason cited is a hefty hike in 'base water coverage'. Apparently my postal code (in southwestern Ontario) is part of an area cited as being at greater risk for sewer back-up and sump-pump failure. The agent does not know how large this special and unique area is. Homes, now, I’m told, have exquisitely appointed basements that, when damaged, require astronomical claim settlements.

All available discounts are already applied. I raised my deductable last year. My credit rating is strong. The only option presented to me is to cut coverage. Also, I learned that my premium payment pays a portion of the ‘pot’ of funds for the industry. I’m so glad I can be of assistance! 

I realize that carrying home insurance is imperative. It's just that a 40% hike for someone with a 37-year claims-free history with the same company seems unrealistic.

Are any of you also facing this sizeable increase? What approach are you taking?


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## Cal (Jun 17, 2009)

I shop around every year when it is time to renew auto and home ins...I have no loyalty.


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## MoneyGal (Apr 24, 2009)

My boss has a $10,000 deductible on his home insurance. This is the fastest way to reduce your insurance premiums. 

Of course, you have to cover all claims under $10K yourself. He actually has a special reserve fund he uses to do this - he sets aside money in a special account just to cover fixing or replacing anything under that level. 

(You can actually read all about this approach in his latest book, Your Money Milestones.)


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## CanadianCapitalist (Mar 31, 2009)

Do you know if all insurance companies allow high deductibles? The one I'm with for home insurance (Bel-Air Direct) lets us have a deductible of just $1,000. I suppose I could call them and try again.

Yeah, our home and auto insurance rates are up significantly as well.


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## MoneyGal (Apr 24, 2009)

I'm not aware of any company that will do this as a "routine" thing. In order to get this kind of reduced coverage, you need excellent negotiating skills. 

But: I assure you it can be done, and it is the solution to high premiums.  (p.s. Works for car insurance, too.)


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## Four Pillars (Apr 5, 2009)

MoneyGal said:


> I'm not aware of any company that will do this as a "routine" thing. In order to get this kind of reduced coverage, you need excellent negotiating skills.
> 
> But: I assure you it can be done, and it is the solution to high premiums.  (p.s. Works for car insurance, too.)


$10k deductible? I'd say that is more of an alternative to high premiums rather than a solution. That's big bucks...


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## MoneyGal (Apr 24, 2009)

FP: I counter that it is a solution to high premiums. But! it is not an approach without its own risks.


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## andrewf (Mar 1, 2010)

It's self-insurance. If you want, bank the difference between premiums and that is the 'premium' you pay to yourself to insure the risk.


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## domanb (Aug 5, 2009)

My home insurance rates went up 30% this year. They increased my coverage amount and added above water damage. I'm on the 5th floor of an apartment right now and declined the ground water coverage, even though they pushed it on my aggressively when I first signed up. So they added above water damage instead. Greedy insurance companies.

After phoning them, they rolled back the additional coverage that I didn't ask for.


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## the-royal-mail (Dec 11, 2009)

Wow. Yet another thing that tips the scales in favour of an apartment rental. 

These prices are outrageous, to the point where these companies are pricing themselves out of the range that benefits the average person. Makes me wonder why we even need this. Sounds like the only ones with anything to gain anymore are the companies themselves.


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## Dana (Nov 17, 2009)

Our premiums went up as well - about 15%. I shopped around but could not find a better deal. We are with State Farm so I contacted our State Farm agent and she suggested we increase our deductible to $2k. This decreased the premium increase to $12 more for one year. She said this is the first year State Farm is allowing $2k deductibles.


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## cautiousone (Jun 9, 2009)

Thanks, everyone, for your responses. I've decided to pay this premium. Increasing my deductible to $2000 from $1000 would save about $27. Decreasing my coverage to say, $20,000 would also only save a small amount and would, obviously, limit my coverage. I can't get my head around how extensive the damage from a sewer back-up or sump-pump failure could be so I'm choosing to continue coverage for full replacement value. Since I've never claimed, the response of this company, in the case of potential claim, is an unknown entity; I'm trusting that it would 'come through'. I will only ever claim for catastrophic loss and I pray that never happens to me or anyone else. If I do ever claim, my claims-free deduction will be removed for five years. It's truly disheartening.


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## houska (Feb 6, 2010)

the-royal-mail said:


> These prices are outrageous, to the point where these companies are pricing themselves out of the range that benefits the average person. Makes me wonder why we even need this. Sounds like the only ones with anything to gain anymore are the companies themselves.


I'm sure there is some opportunistic pricing, but there are two important factors driving this which go beyond gain for the insurance companies

1) Claims escalation is real. Finished basements, fancy finishes in bathroom and kitchen etc - people spent like crazy (generally speaking) on home renos, so the cost of an event has increased. That needs to be paid. Frustrating for those who have not done so.

2) Investment losses. Economics of an insurance company involve bringing in premiums, building a reserve, investing the reserve, and from that paying claims and expenses. Just as individual investors and pension funds were hit with poor investment performance in the crisis, so were insurers, and that money needs to be made somewhere.


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## OhGreatGuru (May 24, 2009)

About 9.5% increase, factoring out an increase due to an extra $1M umbrella liability coverage I added. 

Probably less if I factor out an increase in coverage for weight of ice, snow, and above ground water that had a much lower coverage before, but its harder to isolate it.


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## HaroldCrump (Jun 10, 2009)

Jumping in late....
I got hit with a large increase in home and auto insurance this year, like most Ontario residents.
I believe I had started another thread on the subject, but specific for auto (that's where the biggest increase was).
I called and was told:
- there is absolutely no scope for negotiation
- they don't care if I leave (5+ year customer) and
- I won't have better luck at most other insurers if I move now (may save $5 or $10 but no more)

Finally, we walked through all the coverages I had and I decided to reduce the jewellery coverage and that saved about $7 a month.

Still, it sucks being hit by such an increase on top of everything else that's been going on in the economy since '08.


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## martinv (Apr 30, 2009)

Late as well! Just received our renewal for our homeowner's insurance. A 60% increase over last year. Yikes! We are in BC so the increases are here as well. They increased the total amount of coverage ie. cost of rebuilding quite a bit so that is part of it. Will contact them and let everyone know the result.


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## iherald (Apr 18, 2009)

martinv said:


> Late as well! Just received our renewal for our homeowner's insurance. A 60% increase over last year. Yikes! We are in BC so the increases are here as well. They increased the total amount of coverage ie. cost of rebuilding quite a bit so that is part of it. Will contact them and let everyone know the result.


I received my notice of renewal and it's the same price as last year (within a few dollars)


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## cautiousone (Jun 9, 2009)

End of saga but I'm livid! I paid my home insurance premium this morning in person at my local office. I learned that my premium had been decreased by $18. Good news, right? The reason that the $18 had been included in my premium???? A _"secret" surcharge _levied by head office _by mistake_. 

After speaking with agents in my local office numerous times and even a representative at the corporate headquarters, I was repeatedly told that the increase was entirely due to a high rate of water damage claims within my postal code and that the rate was justified and double-checked with the underwriter. There was never any disclosure about a "surcharge." The premium notice is not itemized so there's no way of discovering hidden charges. I appreciate that my local agents arranged a reduction but GEEZ!!! Talk about corporate bilking of loyal customers!!! 

Anyway, the issue is over for this year. I'm just venting and hoping that my experience will encourage others to question and beware.


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## otown (May 23, 2010)

I just got my State Farm home insurance bill and they want 43% more over last year. They have raised the replacement cost of the house by 13%. There are no other changes. I've found much cheaper insurance so will be changing companies...for the cars as well.

What a ripoff...after 20+ years with them!!!!


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## Brad911 (Apr 19, 2009)

I was waiting for this for a while dreading what the bottom read.....

Home Insurance (just celebrated our 1st anniversary in our first home) went up 50% (50.12%) from last year. I nearly sh*t a brick when I saw the number.

Called the company and actually got all the way up to the regional supervisor @ the Co-operators (whatever that means) when I told them I was going to write a post on my blog about this ripoff. They quoted an "unusual amount of claims from my area in the past 12 months" but couldn't give me any information, data or a source for any of this.

I'm gonna write a post for sure now....who wants to help contribute? 

What really sucks is from what I hear there's not a whole lot anyone can do because all of these companies increased their rates together.....robbery. And I can't even invest directly into many of them to get a dividend for my financial pain!


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## CanadianCapitalist (Mar 31, 2009)

I feel your pain Brad. We replaced our 1992 Honda Accord with a 2004 Honda Accord. Auto Insurance went up another 26% on top of the previous hike of 23%. Our home insurance hike of 14% sounds low inflationary when seen in that light


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## HaroldCrump (Jun 10, 2009)

It's all for the common good, guys, to make sure we don't have deflation.
Let's all volunteer to pay a little more for everything just to be certain we are helping our govt. keep deflation at bay


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## Jungle (Feb 17, 2010)

My rental property insurance went up 17%. I phoned and asked why. They said the cost to rebuild the house has increased. I said construction materials and labour has gone up 17% in one year?? Smells like they are looking for bigger profits. 

Anyway, after complaining, he stated I could lower the cost of rebuilding the house, but was not recommended, as I could have to fork the difference during a rebuild. I decided it was not worth the risk. I know things can add up quick. So, I got them to raise the deductible, which helped lower the premium a lot. In the end, the price only went up $20 or so. 

I did get my condo ins down by $5.00 and car ins down $50. 

Add that with travel and life ins, $2500 has vanished from my wealth this year. But I guess that's better to pay then then take big risks.


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## FrugalTrader (Oct 13, 2008)

I just saw an episode of cbc marketplace that a large portion of insurers out there use personal credit scores as one of the factors of determining the premium.


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## HaroldCrump (Jun 10, 2009)

Insurers will use any possible metric or measurement, when convenient, if it helps increasing the premium.
To Jungle: some insurers have options where you can elect out of rebuilding coverage and just go with replacement value.
I'm with TD General and they have different packages that either include re-building or replacement value.
Re-building comes with a higher premium because the insurer is (ostensibly) taking on the re-building risk.
In reality, as you have just experienced, they are passing on the entire risk onto you to the tune of 17% in a year.
You may be better off going with replacement value.

In the unfortunate event that you need to invoke this benefit, would you have the insurer re-build the house or rather just take the money and buy/build on your own?


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## kcowan (Jul 1, 2010)

HaroldCrump said:


> ...In the unfortunate event that you need to invoke this benefit, would you have the insurer re-build the house or rather just take the money and buy/build on your own?


I know that insurers all replace jewellery rather than letting you shop around with cash.

Wouldn't rebuilding be preferrable to replacing unless the damage was a total loss?


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## Jungle (Feb 17, 2010)

HaroldCrump said:


> In the unfortunate event that you need to invoke this benefit, would you have the insurer re-build the house or rather just take the money and buy/build on your own?


I'd rather build my own. I will call them back and inquire about this option. New policy doesn't come into effect until Sept. 

Interesting thought: When I was shopping around for prices, every ins company had different "rebuild value" prices. IE they use sq foot multiply by their magic number.


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## gregdo (May 18, 2010)

I guess I'm a little late here, but I had a big insurance increase about 3 years ago. I contacted my broker and she explained that's that's just the going rate these days. I asked her to look at other companies and the prices were all pretty much the same.

I ended up calling Canadian Direct Insurance and they were significantly cheaper. I called my broker back and she said that she couldn't match them because they deal direct and don't pay broker commissions. Needless to say I've been with Canadian Direct ever since.

I still check every year just to make sure. This year I found TD Meloche Monnex Insurance (not TD Insurance) to be very competitive but not enough of a difference for me to change.

Just thought I'd put that out there in case anyone is interested.


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## carverman (Nov 8, 2010)

cautiousone said:


> My home insurance premium notice arrived this week immediately following a letter from the insurance company justifying a 40% increase over last year. The primary reason cited is a hefty hike in 'base water coverage'. Apparently my postal code (in southwestern Ontario) is part of an area cited as being at greater risk for sewer back-up and sump-pump failure. The agent does not know how large this special and unique area is. Homes, now, I’m told, have exquisitely appointed basements that, when damaged, require astronomical claim settlements.
> 
> All available discounts are already applied. I raised my deductable last year. My credit rating is strong. The only option presented to me is to cut coverage. Also, I learned that my premium payment pays a portion of the ‘pot’ of funds for the industry. I’m so glad I can be of assistance!
> 
> ...


Insurance is going up every year. How does your agent know that you are
living in a high risk area? Does he have actual proof of claims in your
area..and not generalizing? Just because a river overflows in one area
of S/W Ontario doesn't mean that your house will. It's all subjective and
I think you need to start looking for other quotes that will suppor your case
especially with a 37 year claims free history. Fire insurance/rebuild costs
are one thing and there isn't much you can do there..but there is a device
that can be installed in a basement floor drain to prevent sewer backup
from getting into your basement. I bought one for $20 a few years ago
and installed it myself, and there are probably heavy duty ones available
now that a plumber can install by cementing to your floor drain.

In my case, if I was faced with a 40% increase on my house insurance
because of basement flooding, not being near a river, I would just tell the
agent to drop that option and take a chance..but it depends on how
comfortable you would be without it. Chances are that if you have been
living with 37 years of claims free history, it may not be an issue in your
area..but only you can make that decision.


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## OhGreatGuru (May 24, 2009)

A story on CBC Radio last week said Ontario insurers have been using credit scores to set property insurance premiums. A group of insurance brokers are lobbying the government to prohibit this.


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## carverman (Nov 8, 2010)

OhGreatGuru said:


> A story on CBC Radio last week said Ontario insurers have been using credit scores to set property insurance premiums. A group of insurance brokers are lobbying the government to prohibit this.


This seems like the beginning of the "great insurance scams" ..at least in
Ontario. I have a house with aluminum wiring (modified a few years ago
to conform to the current code). Most insurers will not touch it as soon
as I disclose it. The wiring has been fine and no problems or claims for
the last 15 years since I bought it and the house is around 36 yrs old.

I found have agent who does the hunting for the best deal for me as
I have found that the online insurance quotes and followup start asking
a lot of questions, wiring.roof condition, type of construction etc.

Some on-line "agents" even told me.."we can't insure your house because
it's TOO OLD"..and not even going any furthers with the line of questions.

It's getting ridiculous. All they want now is your premiums and don't
make a claim, otherwise you will pay through the nose! 
Now if they are using credit scores..it seems that they are going too far.


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## kcowan (Jul 1, 2010)

My brother would always shop around for insurers who would accept his "knob and tube" wiring. He said that having no claims for 62 years ought to count for something!


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## peterboro31 (May 11, 2010)

Home Insurance with TD Home and Auto. In 2008 switched to TD, and premium went down 8%! But: 2009 +14.6%; 2010 +13.4% and a punch in the gut, 2011 +42%; all insured features the same. No claims in past 5 years. Checked Kantex and Insurance Hot Line for quotes: all are higher than my current new premium. There needs to be tough government regulation of this industry--I suspect price collusion.


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## carverman (Nov 8, 2010)

kcowan said:


> My brother would always shop around for insurers who would accept his "knob and tube" wiring. He said that having no claims for 62 years ought to count for something!


Not any more apparently. All they seem to want is your premiums and they
compete with each other to advertise the lowest premiums on auto/home.
But then you find out that it only covers the very basics, the stuff they
can get away with and any other coverage is a add-on option and then
it's not that cheap anymore.

As far as house insurance..it seems that even with a low or no claims history,
1) if you live near a river/flood plain...they may refuse to insure you
2) aluminum wiring..they may refuse to insure you
3) you got a flat roof (they may refuse..their excuse, the roof might cave
in due to snow accumulation

4) you have a wood burning stove..more than likely they will refuse
5) your house is "too old" or "knob and tube"..well they think that could
be a fire hazard and they actually may have to pay out...


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## celishave (May 8, 2010)

My insurance (Meloche Monnex) also went up about 35% this year. The kicker is that they also eliminated coverage for damage caused by snow accumulation on roof and any claim for water damage in the basement that was caused by sewage backup, sump pump failure (I don't have one) or previously known deficiencies (ie cracks in basement). Aren't those three basically the cause for 99% of basement claims? Seems like they are essentially saying they will not pay for any water in basement claims. I believe this is being applied to all MM customers. 

In my case I did have two minor claims (under $2500 each) for home break ins that I regret filing as I'm sure it has caused alot of the increase. I have to call them to see what exactly is the reason for the huge rise.

My property tax also increased a large amount as it has most years where I've owned this home. It seems like property taxes and insurance are the two items that increase way more than inflation each and every year and there is little you can do about it.


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## carverman (Nov 8, 2010)

celishave said:


> My insurance (Meloche Monnex) also went up about 35% this year. The kicker is that they also *eliminated coverage for damage caused by snow accumulation on roof and any claim for water damage in the basement that was caused by sewage backup, sump pump failure ). Aren't those three basically the cause for 99% of basement claims? Seems like they are essentially saying they will not pay for any water in basement claims. I believe this is being applied to all MM customers.
> 
> In my case I did have two minor claims (under $2500 each) for home break ins that I regret filing as I'm sure it has caused alot of the increase. I have to call them to see what exactly is the reason for the huge rise. *


*

Your minor 2 claims is most likely the reason that you are seeing an increase of 35%. Home insurance premiums goes up every year as a rule, and if you haven't
submitted any claims in the last 6 years, the insurance underwriter/agent can cut you some slack on some parts of the premium increase..but in your case..you are (probably) treading on thin ice with 2 claims already submitted within 6 years.

A few years ago, the CBC did an expose' on homeowners submitting claims and being dropped after the 3rd claim being deemed a high risk by the insurer that they were using. Once that happens, good luck getting any
other insurance company to take you on without sky high premiums..they are in the business to make money and even though they have to pay out on a claim, they hate doing that if the claim exceeds your premiums and
that happens a lot these days. 

As far as basement water damage claims, most insurance companies now have a limit on how much they will pay out due to flooding. Same with flat roofs (snow load or water leaks), same with plumbing failures and for those that have aluminum wiring installed, (like I have), it is a lot more difficult to find other underwriters to take your business these days.

I had to install copper pigtails on my aluminum wiring and get a special electrical inspection to get the same insurance company/agent that I have used for 15 years with NO Claims to continue to provide coverage.

I've called most other insurance providers (Grey Power, TD, President's choice) and when asked questions about age of house/roof/electrical/plumbing, they are not to eager to take my business once they learn the age of the home.
Then they ask questions, what kind of wiring, type of roof, when was the plumbing last upgraded etc...




My property tax also increased a large amount as it has most years where I've owned this home. It seems like property taxes and insurance are the two items that increase way more than inflation each and every year and there is little you can do about it.

Click to expand...

I'm in the same boat. I still have reasonable home insurance premiums because I'm claim free and have a $1000 deductible. I would never submit a claim under $2500 in my case, because first of all, it's they
would deduct $1000 from the claim and that leaves me to pay the first $1000 myself anyway and even if I do get re-imbursed by $1500, they would register that as a claim against me and raise premiums in the future. 

Taxes and insurance keep creeping up every year, but so do rent increases. I was contemplating moving into a seniors designed living apts nearby at some point within 5 years, but it doesn't have an elevator and I can't manage stairs that well anymore. 

The rent for a shoe box style 2 bedrm apt (600sq ft) is close to $900. 
On top of that they want "around" $300 for management fees (which includes water/electricity/heating) and another $30 a month for parking spot....
and get this $10 a month for a wall unit A/C unit!
That's $1240 a month for a "shoe box" literally!

My 1300sq ft home only costs me about $600 monthly currently (which includes everything including home insurance, all utilities and rising property taxes)..and
I have a driveway/garage/full basement and workshop, central air and gas heating fireplace for that expense.

It's seems that to stay ahead of the insurance premium game, you practically need to be "self insured" for most
things you own, except for a total fire loss, where your
house burns down and it would cost hundreds of thousands to rebuild it...that's the main reason I carry
home insurance now..for fire losses.*


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## Jungle (Feb 17, 2010)

Our Meloche Monnex insurance also went up 10% on the rental. This is now at 22% increase over the last two years. 

They provided an explanation that claims are on the rise due to "climate and weather change".  They also stated they will not be doing coverage for sewer back up and water seekage anywhere in the house from an external source. Every year they take something away from the coverage. 

I have increased the deductible to the highest amount and they have applied multi line discounts. I will call them and ask them to lower it down. They managed to do that with our condo insurance. They got it down 14% after they applied a loyalty discount. (not sure why this was not applied anyway?)

After that, I think I am going to do some shopping around because I do not like how this house insurance keeps going up 10-12% every year.


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## HaroldCrump (Jun 10, 2009)

Jungle said:


> They got it down 14% after they applied a loyalty discount. (not sure why this was not applied anyway?)


The exact same thing happened to us during recent renewal of home insurance.
Insurers have more flexibility for home insurance than they with car insurance.

Car insurance is just a complete rip off scam in Ontario.
There is no where to hide any more.


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## carverman (Nov 8, 2010)

andrewf said:


> It's self-insurance. If you want, bank the difference between premiums and that is the 'premium' you pay to yourself to insure the risk.


With a $10K deductible you are taking on a unnecessary greater risk than perhaps what you can afford.
You have to ask yourself..that for that $100 (or less) premium reduction, can I afford to shell out (or borrow $10,000) to repair my house (in case of a small fire, or basement flood, or someone suing you for injuring
themselves on your property)?

Sure the insurance company will give you a discount, because they are saving themselves $10k for any claim you submit.

Lets say you have a fire that destroys some of your contents or perhaps some of the interior of your
living area with a lot of smoke damage. 

The insurance company will cover the repairs but also deduct the $10K from the total bill.
You have to pay that $10K out of your own pocket and you've also paid the premium for the coverage as well.


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## MoneyGal (Apr 24, 2009)

Carver: This is the essence of self-insurance - you do not share the risk with the insurance company; you agree to cover (relatively minor) losses yourself. 

If you can't afford the loss, don't self-insure - but recognize that your coverage costs will fluctuate (i.e., rise) based on circumstances you do not control.


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## brad (May 22, 2009)

Jungle said:


> They provided an explanation that claims are on the rise due to "climate and weather change".


Not as bogus as you might think. Climate change is a big deal to insurers and especially to the reinsurance industry (the insurers that insure the insurance agencies), since reinsurance has had to bail out many insurers after major storms, floods, hurricanes, etc.

Take a look at this graph from Munich Re, showing the trend in the number of climate-related disasters from 1950 to 2006. Costs to insurers per disaster are also increasing due to greater insurance coverage and higher values of insured property.










Also see this press release regarding 2010:

http://www.munichre.com/en/media_relations/press_releases/2011/2011_01_03_press_release.aspx

"Altogether, a total of 950 natural catastrophes were recorded last year, nine-tenths of which were weather-related events like storms and floods. This total makes 2010 the year with the second-highest number of natural catastrophes since 1980, markedly exceeding the annual average for the last ten years (785 events per year). The overall losses amounted to around US$ 130bn, of which approximately US$ 37bn was insured. This puts 2010 among the six most loss-intensive years for the insurance industry since 1980. The level of overall losses was slightly above the high average of the past ten years."


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## Jungle (Feb 17, 2010)

Interesting, thanks for the article Brad.


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## carverman (Nov 8, 2010)

brad said:


> Not as bogus as you might think. Climate change is a big deal to insurers and especially to the reinsurance industry (the insurers that insure the insurance agencies), since reinsurance has had to bail out many insurers after major storms, floods, hurricanes, etc.


Natural disasters seem to be on the rise..especially powerful tornadoes in the US, but I don't understand what the connection is between the US insurance industry and the Canadian one, except for insurance companies that operate in both countries. 

The population in both countries has risen steadily in both countries (and so has inflation) in the last 50 years, and that would mean more insurance business, as more people need home/life/car insurance, but there would
also be more claims as a result.

More cars and drivers on the road equates to more accidents due to driver error, cost of claims rising dramatically as repairs and personal medical
compensation has seen dramatic increases in the last few years..

but regarding property insurance...

it shouldn't make that much difference whether events in Chile, the Carribean or China should have any effect on premiums here in Canada. It really depends on the number of claims here and the cost of those claims to the
insurers.

The main reason as I see it, for premium increases, is the rebuild cost of the house or dwelling due to construction costs. 

On my policy that has risen steadily each year for my property and so has the premium for it and I have been
claims free for many years, choosing a $1000 deductible.

Each year before they issue the renewal on the policy, the insurer has to consult information for rebuilding your dwelling based on type of construction and square footage, in case of a total loss, and due to steady increases in labour/materials etc, for rebuilding, the premium keeps going up.

Let's not forget that in case of a total fire, the foundation and debris has to be cleaned up and that is very costly now, with municipalities charging fees for commercial waste disposal. It can easily run $40k to clean up the effects of a total fire before rebuilding occurs, and with HST added on labour for rebuilding now, there is a significant cost increase in the total cost of the rebuild.


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## brad (May 22, 2009)

carverman said:


> Natural disasters seem to be on the rise..especially powerful tornadoes in the US, but I don't understand what the connection is between the US insurance industry and the Canadian one, except for insurance companies that operate in both countries.


Several factors at play:

1. The farther north you go, the stronger the impacts of climate change. In the United States, the state that's feeling the most obvious impacts of climate change is Alaska -- nobody doubts the existence of climate change there because they can all see it: entire villages falling into the sea (due to increased erosion related to the retreat of sea ice, which normally prevents large waves from developing), roads and houses collapsing due to melting permafrost, huge forest fires and devastating insect outbreaks due to warmer and drier conditions than usual, etc.

Here's a report on climate change indicators in Canada: http://www.ccme.ca/assets/pdf/cc_ind_full_doc_e.pdf.

Precipitation has increased even in southern Canada, and as a general rule under climate change this translates to an increase in heavy precipitation events (floods, storms) that can lead to property damage. The increase is more apparent as you move farther north.

2. Insurance companies are themselves insured through reinsurance. I wouldn't be surprised if reinsurance companies are increasing their premiums across the board due to increased risks related to climate change. Those increased premiums ultimately get passed on to those of us who purchase insurance.

That said, the reinsurers and insurance companies are trying to help reduce our vulnerability to climate change; they have an interest in this because prevention will limit their losses in the future. Munich Re has a lot of information on their website about what they're doing:

http://www.munichre.com/en/group/focus/climate_change/default.aspx


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## brad (May 22, 2009)

I don't mean to imply that climate change is the only reason insurance premiums are going up -- the factors that carverman identified are probably the main reasons, but the impacts of changing trends in climate and weather are also playing a role. Big natural disasters lead to big losses for the insurance industry, and as their risk goes up, so do their premiums.


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