Last year was the most expensive year for Canadian insurance companies on record. With hailstorms, flooding, and wildfires increasing claim numbers, home insurance rates across Canada are to rise by 5.28% in 2025. According to a new study from Toronto-based insurtech MyChoice Financial, Inc., Ontario homeowners are experiencing a 5.34% increase. Let’s explore the factors that may contribute to rising Canadian home insurance rates in 2025.
Reasons for Higher Insurance Rates
Countries around the world have experienced an uptick in natural disasters and home insurance costs. Insurers worldwide have had to adapt to climate change, resulting in an increase in the frequency and severity of natural disasters. In addition, supply chain disruptions caused by the COVID-19 pandemic and resulting inflation in home-building materials have made the recovery from severe weather events more expensive.
In Canada last year, Canadian insurance companies experienced the most expensive year on record. Hailstorms, flooding, and wildfires all increase the number of claims paid out in 2024. Additionally, inflation has made natural disaster damage more expensive to fix, a trend that is unlikely to reverse. According to the Insurance Bureau of Canada (IBC), Canadian insurers have experienced a 115% increase in property damage claims and a 458% increase in repair costs since 2019.
The MyChoice study finds homeowners in Ontario pay $519 more for insurance than they did in 2015.
MyChoice CEO Aren Mirzaian believes that as climate change becomes more unpredictable, Canada will not be immune to its effects. “We’re witnessing carriers grappling with huge losses – some reporting the worst underwriting results in decades,” Mirzaian says. He also notes that some insurers have limited operations in high-risk zones, such as Aviva Canada pulling back direct-to-consumer home and auto in parts of Alberta.
Home Insurance Rates in Ontario
Even though inflation dropped to 1.9% in Ontario in January 2025, the high number of claims — driven in large part by climate-related disasters — continues to put upward pressure on home insurance premiums, MyChoice says in a release. Last year was also a record year for weather-related losses. Catastrophe Indices and Quantification Inc. (CatIQ) reported that insured losses in Canada totaled $8.9 billion as of February 12.
Home Insurance Rate Increases Due to Several Key Factors:
1. Increased Residential Construction Costs
Since 2019, residential building construction costs have surged by 66%, significantly outpacing the 19% general inflation rate over the same period. This sharp increase raises the expenses associated with rebuilding or repairing homes, directly impacting insurance premiums.
2. Growing Frequency and Severity of Natural Disasters
Canada has experienced a notable increase in severe weather events, resulting in substantial insured losses. In 2024, weather-related damages reached a record $8.5 billion, with events such as the Calgary hailstorm and Ontario pluvial or flash floods contributing significantly. The heightened risk from these disasters compels insurers to adjust premiums to cover potential claims.
3. Shortage of Skilled Labor
The construction industry is facing an acute shortage of skilled labor, with an estimated 25,000 to 28,000 workers retiring annually until 2033. This shortage extends repair and rebuilding timelines, increasing costs that are subsequently reflected in higher insurance premiums.
4. Building Materials & Inflation
Essential construction materials have experienced significant price increases over the past five years; lumber and wood products have risen by 35%, while fabricated metal products have increased by 40%. These rising costs increase the overall expense of home repairs and replacements, which in turn affects insurance rates.
5. Reinsurance Cost Increases
Global reinsurers, facing higher payouts due to the frequency of natural disasters worldwide, are increasing their rates. These increased costs are passed down to local insurers and, ultimately, to policyholders in the form of higher premiums.
These combined factors contribute to the upward trend in home insurance premiums across Ontario in 2025.
The average cost of home insurance in Ontario in 2025 is around $1,176.
What are the projected Interest Rates in 2025?
The good news is that with interest rates dropping dramatically recently, a significant weight will be lifted off Canadian consumers. This should result in the Canadian economy growing closer to its long-run average of slightly below 2% by 2025. According to a recent article in Rates.ca, insurance predictions for 2025 suggest that rates in Canada are expected to continue decreasing. The Bank of Canada (BoC) cut its target rate as long as inflation remains in the 2-3% range.
- Prime rate: Most experts predict the prime rate will drop to 4.45% by the end of 2025.
- Variable rates: Variable rates are expected to decrease in line with the prime rate.
- Fixed rates: Fixed-rate predictions for 2025 suggest that significant reductions are unlikely. Most of the government bond yields have already seen reductions.
Homeowner Programs in Place to assist with Home Insurance Rates in 2025
In response to the rising costs associated with homeownership, including increasing insurance premiums, several programs have been introduced in 2025 to assist Ontario homeowners:
1. Ontario Home Renovation Savings Program
Launched on January 28, 2025, this program is part of Ontario’s $10.9 billion, 12-year investment in energy efficiency—the most significant investment in energy efficiency in Canadian history. It offers rebates of up to 30% for various home energy improvements, including:
- Replacing windows and doors with energy-efficient models
- Upgrading insulation and air sealing
- Installing smart thermostats
- Implementing heat pumps
- Adding rooftop solar panels and battery storage systems
These upgrades can enhance your home’s resilience to weather-related damages, potentially reducing the likelihood of insurance claims and helping to mitigate rising insurance costs.
2. National Flood Insurance Program
The federal government has allocated $31.7 million toward establishing a national flood insurance program, aiming to mitigate the impact of floods, particularly in high-risk areas. While specific details are still forthcoming, this initiative is expected to provide more affordable flood insurance options for homeowners, addressing one of the significant factors contributing to rising home insurance premiums.
3. Mortgage Insurance Rule Reforms for Secondary Suites
Effective January 15, 2025, the federal government has revised mortgage insurance rules to facilitate the construction of secondary suites, including basement apartments or in-law suites. Homeowners can now refinance their insured mortgages to access funds for building these units. The additional income generated from renting out a secondary suite can help offset increased homeownership costs, including higher insurance premiums.
By taking advantage of these programs, Ontario homeowners can improve their homes’ resilience and efficiency, potentially reducing insurance costs and alleviating the financial impact of rising premiums. Industry experts agree that when forecasting home insurance predictions for 2025, there will likely be more of the same as in 2024. Only time will tell whether these measures bring relief and whether the insurance predictions for 2025 prove accurate. For help deciding what types of coverage will work best for you in 2025, please call isure today to speak with one of our knowledgeable representatives.
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