Home insurance: Are you covered for wildfires, floods and other climate-related disasters?

Those losses come on top of sky-high claims in recent years. 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 IBC. 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. As noted above, claims in 2024 have already eclipsed that figure, with the year-to-date tally already over $7.7 billion.

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. 

Other factors shaking up policies

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.)

Will you need climate change insurance?

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.

Does your home insurance policy cover floods? 

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.”

How to get cheaper home insurance

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, home owners can minimize insurance costs with these five money-saving strategies:

1. Shop for a new insurance policy. There are almost 200 property and casualty insurance companies across Canada, and they are all competitors vying for your business. Don’t be afraid to shop around and ask questions, according to the IBC. An insurance broker or aggregator site, like Ratehub.ca, can do the legwork at no cost. (Ratehub.ca and MoneySense.ca are both owned by Ratehub Inc.)
2. Raise your deductible. A deductible is the amount you pay towards an insurance claim. Ask your insurer if raising your deductible would lower your premium. It’s also a good idea to inventory your belongings and confirm you’re not over-insured. Just make sure the deductible is an amount you are prepared to pay at a moment’s notice. (An emergency savings fund could help. Here’s how to build one.)
3. Notify your insurer about renovations. Major home improvements—such as replacing the roof, updating the plumbing or installing a sump pump—just may earn you a discount. Some insurers offer discounts for smaller upgrades, such as installing backup power (a standby whole-home generator or battery backup system).
4. Bundle your insurance. If you haven’t combined your home and car insurance (and any other policies you carry), doing so could get you a tidy discount. 
5. Get all the discounts. Many insurers give discounts for factors that lower insurance risk, such as: being a non-smoking household, having no mortgage, having a centrally monitored alarm system (or 24-hour condo security) or being a homeowner over 50 years old. Check for discounts through your employer, union, alumni association, etc. Paying your premium annually rather than monthly also saves money.

Read more about home insurance:

• Does your home insurance cover water damage? Probably not
• Buying home insurance in Canada: A beginner’s guide
• Before you buy, here’s how to compare home insurance
• What is tenant insurance?
• Is my house covered if I’m not living there? Vacant home insurance, explained

About Jaclyn Law

Jaclyn Law is MoneySense’s managing editor. She has worked in Canadian media for over 20 years, including editor roles at Chatelaine and Abilities. Jaclyn completed the Canadian Securities Course in 2022.

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