Does home insurance vary by postal code?

One of the first questions you’ll be asked on your property insurance application concerns your postal code.

And though there are a number of other factors that go into determining your property insurance rate, your postal code will be used by insurers to see how risky you and your property is to their company. Insurers use your postal code to understand the demographical information of your neighbourhood.

Demographics by postal code

Insurers around the world collect information based on thousands of neighbourhoods. They aggregate data so they can better gauge the potential risk of their clients, their homes, their automobiles and more.

A property insurer will want to assume the least amount of risk when they consider insuring your home, and your area will be associated with a wide range of risk factors.

For example, one look at your postal code can show your insurance company how many break-ins occurred in the area over a set timeframe, if there were any flood or natural damage claims, if vandalism is an issue or if there is a lot of crime around.

In general, postal codes downtown will have higher property insurance rates than those in the suburbs based on the fact that more incidents occur in high-density, urban areas.

Why does it matter where I live?

The lower your risk is to your insurer, the better price you’ll get on your insurance premium.

If your postal code shows that your property is located in a low-risk neighbourhood, your insurance company won't be expecting you to file many claims. Because of this, you'll be rewarded with a lower property insurance premium than someone in a high-risk area.

And if you do live in one of those areas with a higher than average insurance risk, you have even more reason to purchase insurance coverage. After all, your property is only at an increased danger of being victimized.

It pays to shop around for the best insurance quote, so you can save money even if you do live in a higher risk area.

Your location is only a small part of the equation, however, and protecting and securing your home in other categories can save you even more money on property insurance.

Other risk factors that impact your property insurance premium include:

• The replacement cost of your home
• Proximity to water
• How many claims you’ve made
• Electricity and heating type
• If you have a fireplace or wood burning stove
• If you have a pool
• Age of roof
• Type of piping throughout
• Value of contents
• Deductible level
• Security features
• Exterior buildings and their level of security (garages, sheds)

If you can minimize the risk of your home to insurers by taking care of many of the factors listed above, you can still have an affordable premium in a risky postal code.