After severe weather events ravaged parts of the country in 2024, Canadian property owners should be prepared for a jump in their home insurance premiums.
Insurers paid out $8.55 billion in weather-related losses last year, the highest in Canadian history, according to the Insurance Bureau of Canada. The Calgary hailstorm in August caused $3 billion in damage; Hurricane Debby, which ripped through Quebec in August, caused $2.7 billion in damage; the Jasper, Alta. wildfires caused $1.1 billion in damage; and flash floods in the Greater Toronto Area in July caused $990 million in damage. The Insurance Bureau of Canada is quick to point out that this is only the cost of insured damage, not total damage.
Previously, 2016 was the most expensive year for weather-related losses with the Fort McMurray, Alta., fire causing $6.20 billion in damage. Due to the increased frequency of severe weather events, losses have become more and more expensive. The years 2018, 2020, 2021, 2022, and 2023 all rank in the top 10 for most expensive years in terms of weather-related losses.
“The level of risk in this country and the number of events is having a direct impact on what we’re seeing across the country on premiums,” says Jason Clark, the national director of climate change advocacy at the Insurance Bureau of Canada. “Broadly speaking, as the risk in this country goes up, so too do premiums.”
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In March 2024, My Choice Financial, an insurance comparison company, reported that the average cost of home insurance had increased across the country by 7.6 per cent since the beginning of the year.
“Each year, the insurance industry grapples with the growing challenge of covering losses from wildfires, floods, and other climate-related events, necessitating a recalibration of rates to keep pace with this escalating risk,” the company said in its report.
Cottage owners are also feeling the heat of increased rates. If anything, insurers consider them riskier properties. They’re typically not inhabited year-round, they’re more remote and further from services such as the fire department, they’re often surrounded by trees and can be in the path of wildfires, or close to a body of water where they’re susceptible to flooding.
Clark says that some insurers even refuse to cover properties built in risky locations against certain weather-related events. “In Canada, there are 1.5 million households, or 10 per cent of households across the country that are ineligible or don’t have access to available or affordable flood insurance, and that is because these homes are built in high-risk areas,” he says. “In that case, it’s not a question of if these homes will flood, it’s a question of how frequently they will flood and how expensive it will be to recover.”
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The Insurance Bureau of Canada has been working with the federal government, provincial governments, and insurers to try to provide these properties with high-risk flood coverage.
Another factor affecting home insurance premiums is global weather events. While the California wildfires aren’t threatening Canadian properties, they can still have an impact. Clark says the available capital for reinsurance, which is insurance for insurance companies, is becoming more expensive due to these global weather events. Since the risk of large-scale losses is rising, global reinsurers are charging more to offset big payouts.
To keep your home insurance rates low, there are steps you can take. The main thing, says Clark, is to know your risk and be prepared for it. For instance, if your property is in an area that often sees wildfires or hailstorms, you may want to install a metal roof and siding. Or if you reside at the bottom of a hill, you may want to install flood barriers. “Having more natural infrastructure, such as plants, gardens, etc., can actually be a really big help in soaking up that water for certain households,” says Clark.
By showing your insurance company you’ve performed retrofits to reduce your risk, it could factor into your premium.
Clark also suggests reading over your home insurance policy when you get your renewal letter. You can then ask your insurer what you’re covered for and any household changes that could lower your risk and your rate. If you have the resources, you may also want to speak with an insurance broker. They can help find you the best coverage for your situation.
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