Shopping for Property Insurance

Where can drivers obtain the best gas price for their car? Its impossible to say. Since the price for gas is set by a competitive market, what may be the best price today might be the worst tomorrow.

Similar dynamics exist for home & auto insurance. And so, there is never any single insurance company that will always provide the best deal. This makes it necessary for wealthy investors to continually review and update their home & auto insurance coverage.

For wealthy investors with higher value homes & cottages, getting a good price on property insurance can mean saving thousands or even tens of thousands of dollars per year. So, this makes obtaining the correct coverage at the best price an important task for your family office to regularly review & complete.

To combat the uncertainty of shopping for property insurance, this post provides some guidelines & tips homeowners can use to get the best value.

Factors determining the price of property insurance:

Location: The location of the home can impact the cost of insurance. Homes in areas with higher crime rates or higher risk of natural disasters may have higher premiums.

Building and home features: The age of the home, the construction materials, the type of heating and plumbing systems, and other features can all affect the cost of insurance.

Coverage limits: The amount of coverage selected by the homeowner can impact the price of insurance. Higher coverage limits will generally result in higher premiums.

Deductible amount: The deductible is the amount the homeowner must pay out-of-pocket before insurance coverage kicks in. Higher deductibles can result in lower premiums, but also mean the homeowner will have to pay more in the event of a claim.

Claims history: The homeowner’s claims history can impact the cost of insurance. Homeowners who have filed multiple claims in the past may pay higher premiums than those who have not.

Credit score: In Ontario, insurance companies can consider the homeowner’s credit score when setting premiums. Homeowners with lower credit scores may pay higher premiums.

The main levers homeowners can pull to adjust their insurance rates are their coverage limit and deductible amount.

As a wealthy investor, your home likely represents a small portion of your net worth. So, you can also more likely afford to shoulder more of the replacement cost from property damage. And doing so can reduce the cost of your policy.

Let’s say your home is worth $2 million and your net worth is $200 million. Your home is 1% of your net worth. You could probably live with the smallest coverage limit allowed by law.

Likewise, if you can absorb some financial cost from property damage, then you can also increase the deductible amount of your coverage so that you might pay more out of pocket expenses when losses occur to save on the cost of insurance.

Using a broker & shopping around

Using an insurance broker is a way to determine the best property insurance coverage. Your insurance broker should determine your financial situation and risk appetite and then recommend insurance coverage that meets your needs. An insurance broker should also shop around on your behalf to obtain an insurance contract that matches your needs at the best price.

But, in addition to using an insurance broker, consumers should also shop around online for the best rates. Just be sure to compare “apples to apples” when comparing insurance quotes online. Here are links to some price comparison websites that Canadians can use to shop for property insurance:

• InsuranceHotline.com
• Rates.ca
• Kanetix.ca

Bundling

Buying both home & auto insurance from the same company is often a way to obtain discounted rates.

Many insurance companies in Canada offer discounts to customers who purchase multiple types of insurance from them. Bundling insurance policies can result in lower premiums for both policies.

In addition to cost savings, bundling property insurance can also provide the convenience of having both policies with the same insurer. This can make it easier to manage insurance policies and can simplify the claims process if the customer needs to file a claim on either their property insurance.

More Property Insurance Shopping Tips

Compare apples to apples: When comparing policies from different insurance companies, it’s important to make sure that you’re comparing policies with similar coverage limits, deductibles, and other features.

Review the policy carefully: Homeowners should carefully review the policy documents to understand the coverage provided, any exclusions or limitations, and the claims process.

Shop around: Homeowners should obtain quotes from multiple insurance companies and compare them to find the best value for their needs.

Bi-annual review: either each year or every two years, review your property insurance coverage and obtain fresh quotes. Since your needs and financial circumstances change. Depending on your time available, consult with a few insurance brokers in addition to obtaining quotes from online marketplaces and directly online from insurers.

How should your family office help?

Calling around to various insurance brokers and obtaining quotes online can be time consuming. But, this is perfect task for your family office as this task cannot be easily outsourced since you’ll need to share your personal information during the process. Your family office already has this info on file and can be trusted with it.

After their findings, your family office should present you with an easy to read comparison of all the quotes and information they’ve obtained. This could be done on a 1-page PDF with a table to make digesting the information easier.