Climate change is a global concern and has recently been profoundly felt across Canada. Extreme weather events and catastrophes are becoming more commonplace. As forest fires, storms, floods, and other weather events increase in frequency, they will continue to cause extensive damage. As a result, homeowners will have to bear the brunt of it. That being said, what does this mean for homeowners? We demonstrate how the relationship between climate change and home insurance translates to increased premiums.
Concern Over Climate Change and Home Insurance Is Increasing.
Canada’s home insurance market remains broadly competitive, though mounting climate-related losses are pushing insurers to tighten their terms and rework portfolios. This means that many households are left facing higher costs and patchier coverage.
As of today, carriers are still writing business across the country, and Canada has so far avoided the coverage deserts that are seen in some states in America. However, insurers are raising premiums faster than inflation, increasing deductibles and narrowing coverage. On top of this, they are reducing exposure in higher-risk regions.
Weighing The Risk
The risks are becoming too great for the insurance industry to bear. Why? Weather-related insurance payouts are exceeding the home insurance premiums that insurers collect.
To protect their revenues, many insurance companies are increasing premiums. In areas with very high or uncertain climate risks, analysts predict insurers may stop providing coverage to homeowners entirely. This decreases competition, leaving fewer choices and increasing prices. According to Justin Thoulin, CEO and co-founder of Lowestrates.ca, “Climate change is of massive significance to humanity overall and to the insurance business because the more of the cataclysmic events that occur, the more claims are going to need to be paid out by the insurance companies and therefore, higher prices will be [a result for] consumers and businesses when it comes to home and dwelling insurance.”
Rebalancing Climate Change and Home Insurance Risks
Insurers have not staged wholesale withdrawals; several large players have thought of scaling back in catastrophe-prone areas.
Raymond Chun, TD Insurance’s Chief Executive, told analysts of their plans.
“We’ve rebalanced in some of the higher severe weather regions,” Chun stated. “Where we had a higher concentration in some of the high-severe weather zones, we’ve moderated. TD is targeting growth in regions with lower catastrophic risk instead.”
The pressure to rebalance has intensified after several years have proven to be expensive, capped by a record $9.4 billion in insured losses in 2024. A TD report found average personal property losses between 2020 and 2024 were nearly double the perior prior. To add to this, the number of catastrophic weather events averaged to about 15 a year, up roughly two since the 1980s
According to TD economist Likeleli Seithlheko, growing insured personal property losses are putting a considerable strain on Canada’s home insurance sector.
Higher Deductibles And Gaps In Coverage
Between 2021 and 2025, premiums for home and mortgage insurance rose 31% between 2021 and 2025, according to Statistics Canada. Some specific provinces with heavy claims, such as British Columbia and Alberta, have seen steeper increases of 68% and 58%, respectively.
Insurers are also raising deductibles, in some cases up to $10,000 for specific perils. These include hail, imposing percentage deductibles for wind and quake, reducing limits and declining to offer coverage for certain risks. According to Seitlheko, roof coverage in hail belts, for example, is increasingly subject to actual cash value settlements or lower permits. He states that in worst case situations, insurance coverage is simply not availablefor certain perils.”
Flood insurance was introduced in Canada roughly a decade ago. However, to this day, it remains patchy. According to the Insurance Bureau of Canada, 1.5 million households cannot get flood coverage. For those who can get it, premiums can add up to $15,000 a year.
Will You Need Climate Change Insurance?
There are several factors impacting the insurance market. From low interest rates to the rising cost of building materials, climate change will significantly affect your home insurance costs over time. While separate weather home insurance doesn’t exist (not yet, anyway), coverages are available to protect you and your home from severe weather incidents. Weather-related perils with coverage from standard home insurance policies usually include wind, hail, fire, and lightning. Certain types of water damage also have coverage. However, flood damage or water damage resulting from floodwater is typically not, to the surprise of many Canadians. Landslides, avalanches, earthquakes, and other earth movements are not automatically included.
Water damage is one of the most common perils that lead to a policyholder filing a claim. Any average contents insurance policy should protect you from these events, but there are limits you should be aware of. The incident that causes the damage or loss would have to be “sudden and accidental.”
However, home insurance is evolving with the times. Water is now Canada’s top cause of property damage. According to the Institute for Catastrophic Loss Reduction, every homeowner should consider adding it to their policy, even if they don’t live in a floodplain. In response, a few insurers—such as Aviva, Intact, and Pembridge—now offer overland flood insurance coverage, which was introduced in 2015. It’s available to over 90% of consumers, and over 60% have purchased it. Overland flood coverage costs about $10 to $30 monthly when you add it separately to your policy. Still, many Canadian homeowners are left vulnerable. Planning for a national flood program is underway to ease these concerns and worries.
Changes To Help You Along The Way
Now that you know how climate change affects your home insurance, what’s next? In June of 2021, 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 an in increase in flooding, wildfires, and heat.
What Changes Can You Make Today?
To help Canadian homeowners keep their homes safe from extreme weather, here are a few strategies that you can implement right away:
- Install a backwater valve/sump pump in basements. Telling an insurance provider about this could result in a discount.
- Regularly clean your gutters/pipes.
- Adjust downspouts away from homes and onto the street.
- Clear five feet of vegetation around your home. This can halve the risk of a house being destroyed by a wildfire.
- Use impact-resistant materials on roofs, especially in a hail zone.
- Avoid planting coniferous trees, which are more flammable than deciduous trees.
- Add water flooding coverage to insurance policies (check with your insurance provider, as most require this to be purchased separately).
Analysts note that if the government continues to provide incentives to bring about positive climate change, subsidies could be provided to insurance companies. These may then be passed on to you, the consumer, for making greener choices in your home. Strategies to keep home insurance prices low range from bundling home and auto policies to installing energy-efficient pipes/solar panels.
Climate Change and Home Insurance: Conclusion
Governments need to invest now to reduce our climate risks. Steps to help ensure that insurance remains a viable part of how we recover from climate impacts are also important. Talk to one of our insurance representatives to discuss severe weather coverage for your current homeowners’ policy. There are over 200 property and casualty insurance companies across Canada, and they are all competitors vying for your business. Let us help you shop around for the most savings on your home policy!
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