Last summer, at the start of Canada’s worst wildfire season on record, our insurance provider informed us that they wouldn’t be renewing the coverage for our home in Atlin, B.C., a small, rural town and cottage country to neighbouring Whitehorse. We’d recently built a new house on our property and were told that it would be no problem to add it to our existing policy. However, when it came time to move in, the insurer balked, asking us to confirm our postal code more than once, which made me wonder if their reluctance had something to do with our rural location. It was early June and already wildfires had burned more than 50 times more acres than the 20-year average for that time of year. No amount of protesting (or outright begging) would change the insurer’s minds. I frantically began calling brokers and filling out applications online, knowing that if a wildfire broke out within 100 kilometres of us—which was not uncommon in the surrounding spruce-pine forest—insurance coverage might become all but impossible to find.
Whether it’s wildfires in the Okanagan or summer storms in southern Ontario, a changing climate is making it riskier for insurance providers to cover properties and businesses. In 2023, severe weather cost insurers more than $3.1 billion in damages across the country, the fourth-worst year on record. Add to that the increasing replacement cost of construction materials and labour, and insurance companies have had to rejig their risk models, making premiums more expensive. According to the Statistics Canada Consumer Price Index, the price of home insurance and mortgage insurance climbed 39 per cent in the five years leading up to December 2023.
That said, it could be much, much worse. In U.S. states such as California, Florida, and Louisiana, which have been severely battered by fires, storms, and floods, many properties have become increasingly uninsurable. For example, in California last year, two of the largest U.S. insurers, State Farm and Allstate Corp., stopped issuing any new home insurance policies altogether.
The situation isn’t quite so dire north of the border. According to Rob de Pruis, the national director of consumer and industry relations at the Insurance Bureau of Canada, wildfire, wind, hail, and lightning insurance remain available across the country. However, flood insurance is another story, with 1.5 million households unable to access affordable coverage. This number isn’t going up or down; it’s fairly consistent across the country, says de Pruis. “Every region across Canada experiences overland flood risk,” he says, and while the insurance industry is prepared to cover 90 per cent of properties, they won’t insure those at the highest risk of flooding. For example, in 2021, many of the properties impacted by the atmospheric river event in B.C. weren’t able to access overland flood coverage because they were in “known flood plains or high-risk areas,” says de Pruis. He notes though, that one reason this high-risk group isn’t a growing population is simply because there isn’t a lot of new development and infrastructure in these vulnerable areas In the spring of 2025, the federal government will roll out a national flood insurance program, which will ensure affordable flood coverage is available to all homeowners. Those in high-risk zones would be able to purchase government subsidized insurance through the same brokers or agents they use today.
So what does this mean for cottage insurance now?
It’s hard to generalize when it comes to insurance because every property is unique, however, “a lot of cottages just come with more inherent risk,” says Matt Hands, the VP of insurance at ratehub.ca, an online comparison platform for financial products. Aside from the increased flooding risk for lakefront properties, there’s the fact that cottages are often in rural areas, far from fire departments and fire hydrants. Plus, seasonal properties—almost by definition—are left unoccupied, raising the risk of a problem, such as damaged roofing from a wind storm, going unnoticed. All that inherent risk is “reflected in the price,” says Hands.
RatesDotCa, a financial products comparison site, found that in Ontario, from 2021 to 2022, rural properties were hit hardest by increasing costs of home insurance—an increase of between 15 and 18 per cent—highlighting that the communities who saw the greatest premium increases were more vulnerable to the effects of climate change. “When disaster strikes, over time premiums can increase for everyone, but the areas that usually experience the issues get hit the hardest with that increase,” says Hands.
Angie Scott, an insurance broker at Muskoka Insurance Brokers, says that, in the last several years, she’s seen policy terminology change. She also notes that it’s become difficult for some cottagers to get coverage for overland flooding, “if they are located within, say, 100 metres of the lake.” Some providers are limiting coverage. For instance, you may only be able to get $25,000 in flood insurance as opposed to your $1,000,000 policy limit, says Scott.
What does the future hold?
According to ratehub.ca, home insurance won’t be getting any cheaper in 2024. But what about the situation five or 10 years from now? “The short answer is, we simply don’t know,” says de Pruis. “Future premiums are hard to predict. Similarly, it’s hard to predict inflation. Insurance is based on the replacement value of property—if it costs $200,000 to replace your house now, and it goes up to $500,000 next year, then your insurance will go up.” Nevertheless, there are a few things you can do to help keep your cottage protected in a changing climate.
1. Buy the right coverage
Primary home insurance is typically comprehensive except for exclusions, such as optional flood, sewer backup, or earthquake coverage, which may be available to purchase from your provider separately. But cottage insurance often operates on a named perils basis, meaning it only covers those perils that are specifically stated in the policy. For example, a cottager who doesn’t live in a flood- or earthquake prone area might choose to only buy coverage for fire, theft, and hail damage. If you can’t find coverage for certain perils from one company, be prepared to shop around with other providers.
2. Monitor your policy
Carefully read your renewals and understand any changes. If an insurer decides to stop providing a particular type of coverage, don’t panic. “Some people get concerned when they see a letter saying, ‘We’re no longer going to offer you coverage,’” says de Pruis. “It doesn’t mean coverage is unavailable.” Each organization makes its own independent business decisions to manage their exposure. If your insurer stops providing a particular type of coverage, look into your options with other companies.
3. When in doubt, double-check (or triple-check)
“While fire insurance is typically included in basic cottage insurance, it’s always a good idea to confirm with your insurance broker,” says Hands. Are you adequately protected against wildfires? It’s premature to make a definitive prediction of how the changing frequency of wildfires will impact cottage insurance coverage and premiums in years to come, he says. But, “as the frequency of severe weather events such as wildfires persists, insurance companies will inevitably face increased payouts. Consequently, they’ll need to strategize ways to recoup these losses.”
4. Protect your palace
The best way to maintain your coverage is to avoid a claim in the first place, which will make your property more attractive to insurance companies and may earn you claims-free discounts. In addition to regular maintenance and upkeep, take steps to protect your cottage from severe weather. Firesmartcanada.ca offers information and programs for making your property more wildfire-resilient, from basic landscaping to renovations using non-combustible building materials. For flood protection, the Intact Centre on Climate Adaptation at the University of Waterloo has developed a list of steps, ranging from simple tasks, such as cleaning debris from your eavestroughs, to more complex upgrades, such as installing backwater valves to close the sewer line during periods of flooding and prevent water from entering your cottage. If you’re planning renovations, consider what changes might make your building more climate-resilient. If you live in a hail prone area, you may want to consider impact-resistant roofing and siding, says de Pruis. Or, if you’re subject to high winds, you might want to install hurricane tie-downs on your roof, simple metal brackets that provide resistance to wind uplift forces.
5. Don’t give up!
Because, “there is a policy out there for everybody,” says Scott. Every provider offers different coverage and no two companies have the same policy wording or rates. In our case, finding new coverage wasn’t easy. Many phone calls and application forms later, I found two providers that would insure our home. I was relieved when the policy documents arrived in the mail. And needless to say, I was especially glad for those bits of paper a month or so later when a wildfire broke out across the lake.
Fiona McGlynn is a regular contributor to Cottage Life. She also wrote “The $12,000 Hole to Nowhere,” in the May 2024 issue.
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