Will average home insurance costs go up because of COVID-19?

We’ve all spent more time at home as a result of the pandemic, with each new wave of the virus necessitating a variety of restrictions and lifestyle changes. Canadians have also been working from home in record numbers, with some individuals making the move away from the office permanent. All of that extra time in our houses has led to an unexpected consequence for some families. The Ontario Fire Marshal recently reported that house fires were up by 50% in January 2022, compared to the same period in 2021.

There are a variety of factors behind these incidents, including smoking indoors and the increased use of space heaters in the winter, but unattended cooking is a leading cause of residential fires. With more people working remotely, home sick or out of work due to the pandemic, cooking at home (often while working and/or watching the kids) could be a reason for the increase. 

Will more house fires lead to paying more for home insurance?

These statistics are troubling for a number of reasons, most notably the tragic loss of life. From a financial perspective, they may leave some people wondering if home insurance rates will go up at an already challenging time.

A notable increase in house fires would presumably result in an increase in claims, which could have a ripple effect within the insurance industry—similar to how fewer hours spent commuting to work resulted in lower auto insurance rates for some drivers.

Interestingly, none of the insurance specialists we spoke with reported seeing an impact from residential fires on home insurance rates to date. However, that doesn’t mean home insurance rates haven’t been impacted by the pandemic.

Insurance broker Peter John Van Dyk, partner at PV&V Insurance Centre in Burlington, Ont. and Meester Insurance Centre in Smithville, Ont., hasn’t seen a dramatic increase in either the frequency of fire-related claims or the severity of fire-related incidents over the course of the pandemic. He says flooding, hail and wind storms are more common issues—a sentiment that was echoed by several other professionals. “Weather is still a huge factor in insurance claims,” Van Dyk says. 

An increase in fire incidents may not be impacting the cost of home insurance at this time, but rates are definitely going up because of the pandemic. 

So, why are average home insurance rates climbing?

“Supply chain issues are causing havoc with just about everything,” Van Dyk says. He explains that when you make a claim for something like weather-related damage to your home, it may be more difficult or take significantly longer to get supplies and reputable trades out for repairs. “This may result in higher premiums being passed on to the consumer.”

There have also been significant behavioural changes among policy holders. Instead of seeing people defaulting to “replace and repair” damage to their home after a claim, Van Dyk has noticed a significant increase in claimants opting for a cash surrender. This means more clients are choosing to receive a cheque that covers the damage to their home rather than having materials replaced and/or repaired. Van Dyk believes this is likely because many Canadians are using the opportunity to renovate, rather than simply repair damage, to their homes. But there’s a catch, he says. “With a cash surrender, you don’t get paid out in full—there’s a calculation we use [to determine payment].”

Many Canadians are increasing their coverage to reflect the value of a newly-renovated home; at the same time, a high number of people have been buying vacation homes and rental properties—most of which require insurance, notes Van Dyk. “We’re seeing more second homes and Airbnbs.”

And, those who are struggling to make ends meet, as well as those who want to save money insuring multiple properties, are considering much higher deductibles. The average home insurance deductible is $1,000, but it can go as high as $5,000—and with higher deductibles come lower monthly premiums. “It’s a way to manage long-term expenses,” Van Dyk says. 

Final thoughts

Van Dyk recommends consulting with an insurance broker to ensure you have the right coverage—at the right cost—for your family. “Talk to a local broker—someone who will work with you to understand your family’s needs,” he says. As long as the pandemic continues to change and evolve, along with Canadians’ insurance needs, you’ll be glad to have access to the one-on-one professional advice a broker can provide.

More on home insurance:

• Is my house covered if I’m not living there? Vacant home insurance, explained

• Why your home insurance rates are rising

• How to get lower home insurance

• Home insurance guide

About Erin Pepler

Erin Pepler is a freelance writer based in the Toronto area. A frequent contributor to MoneySense, she is also the author of Send Me Into The Woods Alone: Essays on Motherhood.