Why Home Insurance Premiums Are Rising and What You Can Do
Whether you own your home, rent or live in a condo, many Canadians can expect their home insurance rates to go up this year.
Several factors are behind the rising rates. Increasing frequency of severe weather events are causing more serious damage and more costly insurance claims. The rising cost of building materials, supply chain issues and unfilled jobs due to COVID-19 disruptions are driving up the costs of home repairs.
In this article, we’ll explain some key factors causing home insurance rates to rise and what you can do to help rein in your costs.
What Are Some Key Factors Driving Up Home Insurance Rates?
Extreme Weather Events and Catastrophes
Floods, severe thunderstorms, hail, wildfires, windstorms and other severe weather events have become more frequent, destructive and costly. In 2021, Canada experienced 14 catastrophic weather events with insured losses exceeding $2 billion – one of the costliest years to date.1 As weather-related damages go up, so does the cost of insurance overall. Insurers typically adjust rates on a province-by-province basis based on actual and anticipated weather-related losses.
Rising Material Costs
Another key consideration when pricing property coverage is the cost to repair or rebuild a home in the event of a loss. These costs have risen significantly during the pandemic because of a number of factors:
- An increase in demand for home renovations.
- An increase in demand for new construction.
- Supply chain disruptions in Canada and around the world.
These factors, combined, have led to limited supplies and inflated prices for most building materials. Consider these recent statistics:
- Lumber and wood products have increased 56.8% since before the pandemic2
- Fabricated metal products and construction materials have increased 46.4% since pre-pandemic3
- Canada is experiencing a shortage of cement; while we imported roughly $895 million in cement and concrete-related goods in 2021, according to Industry Canada, demand is outpacing supply and the shortage is likely to continue into 20234
As building costs rise, so does the cost to repair or replace homes damaged by covered losses.
Job Openings in Skilled Labour
New home and renovation projects may be surging, but the construction industry is facing a skilled labour challenge. Many skilled workers retired and others exited the industry during the pandemic. While unemployment in Canada sits at 4.9%, the construction industry’s unemployment rate is even lower at 2.7%5. With more skilled labour needed and fewer people available to fill the demand, the cost to complete projects rises.
Factors Impacting Your Home Insurance Rate You May Be Able to Control
Current market conditions that affect your insurance premiums may be out of your control, but there are steps you can take to help keep the cost of your property coverage in check.
- Take steps to prevent losses. Be sure to check with your insurance broker about any savings you might qualify for as a result of the preventative measures you take. For example, Travelers offers insurance premium discounts for centrally monitored burglar and fire alarms.
- Review your insurance. Ask your insurance broker to review your current coverage to ensure that you are getting the customized protection you need. Make sure all home improvements are accounted for. Cancel or reduce coverage you no longer need.
- Include credit. Many insurance companies across Canada, including Travelers, use your credit score as a factor when calculating your home insurance premiums. This discount is only available when you provide your credit consent.
- Increase your deductible. A higher deductible will likely reduce your premium. Just remember to have enough savings to cover your deductible should you experience a loss.
- Bundle your coverage. Many insurance companies offer discounts when you purchase more than one policy. Home and auto are commonly bundled together for a discount, but discounts may also apply if we insure your boat, cottage or other properties.
- Look for customer retention programs. Some companies reward loyal customers with a discount. Travelers, for example, offers a Loyalty Reward for customers who have been insured for five or more years and are claims-free.
Current market conditions are challenging. Catastrophic weather events are on the rise. Pandemic-era disruptions, including shortages in building materials and skilled labour, are driving rate changes. But there are factors within your control when it comes to the premiums you pay. It’s smart to take advantage of them.
Find a local broker to get a home insurance quote today.
2 Statscan, Industrial Product Price Index, July 2022
3 Statscan, Industrial Product Price Index, July 2022
5 Statscan, Labour Force Characteristics by Industry, July 2022