heritage general insurance - Rising Canadian Home Insurance Rates 2022

Rising Canadian Home Insurance Rates in 2022 – Why!?

Thanks to increased inflation and a range of other factors, Canadian home insurance rates have increased in 2022. Let’s take a closer look…

According to a RatesDotCa report, homeowners have seen an average 5% home insurance rate increase this past year. If we look at our friends and family in Ontario last year, the average cost of homeowners coverage was $1,342. This year, with the 5% increase, that means an additional $67 per year – a total of $1,409 for home insurance in 2022.

There are a variety of reasons for the increases in homeowners’ insurance coverage this year. They include renovations and rebuilds, of course. But there are also the impacts of climate change and, not surprisingly, inflation.

Inflation and home insurance rates

We can’t talk about any recent price hike without exploring the impacts of inflation. Before we look at its impact on rising home insurance rates, let’s take a quick look at how the rate of inflation is calculated. The Canadian government uses a monthly consumer price index (CPI) to record the changes in prices from a fixed collection of goods and services. Each item in the basket is categorized – food, shelter, furniture, clothing, transportation, and recreation. Each group is then weighed accordingly to determine the nation’s overall inflation rate.

As with so many other economies around the world, the rate of inflation in Canada has climbed very quickly. In June, inflation hit a high of 8.1% before we saw a slight reprieve in the months following. According to Statistics Canada (StatsCan), this year, Canadians have experienced the most rapid annual cost of living increase in almost forty years. As you already know, we consumers bear the impact of higher prices on everything we need to live, from groceries to gasoline. And, of course, the cost of building materials.

Home improvements and increased insurance rates

Those of us who could literally sheltered in place for months, if not years, during the pandemic. In a matter of weeks, we found ourselves doing everything from school to work to exercise and recreation in our homes. Remarkably, it sparked a mad rush on home improvements and rebuilds. As a result of all of the home construction activity and the increased costs associated, it has had a significant impact on what we pay in home insurance.

With the sharp increase in the price of building materials, so goes the cost of insuring your home. The CPI recorded early this past summer identified that home and mortgage insurance rates across Canada increased by an average of 4.9%. The expenses that directly impact insurance premiums increased dramatically. For example, home replacement costs grew by 10%, and property repair and maintenance went up by 7.2%. Rental properties, usually protected by policies if a dwelling becomes uninhabitable due to an insured peril, also jumped 4.3%.

Home renovations

Home renovations increase what it will cost to rebuild, driving up insurance premiums. According to StatsCan, in 2021, Canadians applied for almost 213,000 residential alteration and improvements permits. Whether it’s finishing a basement or building an addition, any upgrades increase the overall replacement cost of your home. So, as your replacement cost increases, so do your premiums.

Rebuilding your home

There have been changes in consumer purchasing behaviour and many pandemic-induced supply chain issues. These factors combined initiate a surge in primarily lumber costs which helped to increase the rates for homeowners insurance coverage.

Insurance rebuilds tend to be more costly than construction costs arranged through private contractors. Insurers have to rebuild quickly to help get the homeowners to return safely to their homes. It’s not unusual for the insurer to pay for displaced homeowners’ accommodations during the rebuild, only adding to the costs incurred and requiring faster construction timelines.

Along with the usual factors such as the age of your home and where you live, among others, the inflationary costs of materials will have an impact on your insurance premiums.

Impacts of climate change

British Columbians, as in other parts of Canada, have seen first-hand significant weather events as a result of the effects of climate change. The impact? Losses resulting in millions of dollars of insured damages have increased insurance premiums. While there were many devastating weather events across the country, two catastrophic examples were the epic flooding in BC last fall that incurred costs estimated at more than $450 million and the tornadoes that twisted through Barrie, Ontario, last summer, resulting in $100 million in insured losses

Whether it’s flooding or tornadoes, wildfires, hail, or the recent hurricane that battered Newfoundland, extreme weather events will only continue. And result in untold insured losses, ensuring that home insurance rates will only increase.

Can you do anything about rate increases?

It’s nearly impossible to predict how much home insurance premiums will go up. Due to the range of factors that influence the price of insurance, they can also vary depending on where you live.

While there’s no way to control increasing rates, there are ways homeowners can take a bit of the edge off how much they pay:

  • Discounts: There are discounts available from some insurers. The savings can help reduce the price of premiums. Examples of discounts include properly installed fire alarms, monitored security systems, and reductions if you are claims-free.
  • Higher deductibles: Often, you can reduce your home insurance premium when you opt for a higher deductible – the amount you pay in the event of an insurable incident.
  • Soft credit checks: If you maintain good credit, your broker can run a soft credit check that can potentially lower your premium. This check is merely an inquiry and will not impact your credit score.
  • Bundling: Look into grouping your insurance purchases – home and auto, for example – together with the same provider to possibly save money.
  • Membership or employment discounts: In some cases, professional organizations and businesses offer group insurance rates for members and employees. For example, if you are an alumnus of a university.

Be sure to review your home insurance policy every year to make yourself aware of any changes. And, certainly, be sure to inform your broker if you make any upgrades to your home. And don’t be afraid to ask if there are any discounts or if there are ways you can bring down your premium.

Do you have questions about your home insurance premiums? Talk to us!