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Severe weather and disasters due to climate change are increasing home insurance costs in Canada. Here’s how to lower your rates and protect your home.
As wildfires continue to burn in parts of Canada, we’re increasingly feeling the impacts of the climate emergency.
Canada is warming twice as fast as the rest of the world, according to a report by the federal government in 2019. The highest temperature increases are in the North, the Prairies and northern B.C. Over time, we’ll see more precipitation, snowstorms, wind, hail, floods, droughts, smog, wildfires and “extreme heat events,” like the heat dome that scorched Lytton B.C., in 2021. That means more weather damage to infrastructure, businesses and homes—and a corresponding rise in insurance claims.
Between 2009 and 2020, Canadian insurers spent an average of $2 billion annually on losses related to natural catastrophic events (those resulting in insured losses of $25 million or more)—more than four times the average of $422 million paid out annually from 1983 to 2008, according to the Insurance Bureau of Canada (IBC). Claims have continued to rise. In 2022, insured damage for severe weather events reached $3.1 billion, making it the third-worst year in Canadian history for insured losses. In 2023, losses again hit $3.1 billion. Three-quarters of the way through 2024, insurers are reeling from the impacts of July’s flash floods in Toronto and southern Ontario—insured damaged totalled $940 billion, according to the IBC—and the wildfire in Jasper, B.C., whose insured losses have surpassed $880 million.
Canadians are no strangers to severe weather, but something has shifted in recent years. The impacts of these events are being felt more strongly, according to the IBC.
Although they’re not weather-related, earthquakes are another natural disaster we can’t ignore. Canada averages over 4,000 per year, most too small to be felt, reports IBC. British Columbia is most prone to earthquakes, but they’re also frequent in the Ottawa and St. Lawrence valleys, in New Brunswick and off Newfoundland. A large earthquake near a populated area could cause a significant amount of damage—affecting local and national GDP. (Earthquake home insurance is available—ask your insurer.)
Watch: Home Insurance & Climate Change
Many factors impact the insurance market—from low interest rates to the rising cost of building materials—so it’s difficult to say how climate change is affecting your home insurance on its own, and separate weather home insurance isn’t a thing (not yet, anyway).
What we do know is that certain areas of the country are at higher risk of flooding, fires and other extreme events, and premiums are priced accordingly. That said, no one is immune to weather damage or its financial impact. Canadians from coast-to-coast-to-coast are at risk, suggest the IBC. Of the top 10 catastrophic events in Canada, six occurred in Alberta, and the remaining four in Ontario, Quebec and Atlantic provinces.
Weather-related perils covered by standard home insurance policies usually include wind, hail, fire and lightning. Certain kinds of water damage are also covered—but typically not flood damage or water damage caused by floodwater, to the surprise of many Canadians. Landslides, avalanches, earthquakes and other earth movements are also not automatically covered.
However, home insurance is evolving with the times. Water is now Canada’s top cause of property damage. In response, a few insurers—such as Aviva, Intact, Pembridge and Unica—now offer overland flood insurance coverage, first introduced in 2015. It’s available to over 90% of consumers, and over 60% have purchased it. Added separately to a home insurance policy, overland flood coverage costs about $10 to $30 per month.
Still, insurers may decline to cover homes in high-risk areas, leaving many Canadians vulnerable. Planning for a national flood insurance program is under way; until it materializes, homeowners can seek coverage from The Co-operators. It’s the only insurer offering overland flood coverage to those at highest risk, as well as the only provider of coverage for storm surges (waves and floods caused by storms and hurricanes).
“As a co-operative insurer, we felt compelled to respond to the previously unmet need for residential insurance for overland water damage in this country,” says Tara Laidman, associate vice president, National Product Portfolio. “In recent years, weather has contributed to record levels of water damage to Canadian homes—a trend we expect to continue.”
Now that you know how climate change is affecting your home insurance, what’s next? In June, a coalition of insurance industry representatives, disaster relief organizations, municipalities, Indigenous organizations, environmental NGOs and research organizations—collectively known as Climate Proof Canada—began urging the federal government to take action on climate change, including a national climate adaptation strategy to protect against the dangers of increased flooding, wildfires and heat.
In the meantime, however, homeowners can minimize insurance costs with these five money-saving strategies:
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