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How Is Climate Change Affecting Home Insurance Premiums?

March 3, 2020
3 mins
A young man and woman review home layout and design plans

As severe storms erupt across Canada more often, consumers may find their home insurance rates increasing, or they may face challenges finding coverage for their properties altogether.

Floods and fires tend to be the biggest threats to Canadian communities; both can affect home and auto insurance rates. But it’s flooding that is the costliest disaster year-over-year. The average cost of a flooded residential basement claim is more than $40,000, notes the Intact Centre on Climate Adaptation. The frequency and magnitude of flooding are rising across the country, and as that continues, homeowners who face higher flooding risks may struggle to get the coverage they require.

Is climate change fuelling extreme weather?

In some circles, debate continues to swirl as to whether or not extreme weather is the result of climate change. Nevertheless, most people recognize the weather patterns across Canada and the globe are shifting.

A historic winter storm that hit St. John’s, Newfoundland, on January 17 with more than 76 centimetres of snow and winds gusting as high as 150 kilometres per hour in a single day may be an example of where things are heading. Which is to say greater preparation is in order as more intense storms become more frequent.

On that note, insurers are aware of the growing threats severe inclement weather and climate change present. In its latest research on the topic, the Insurance Institute of Canada (IIC) says since the 1980s, property claim payouts because of severe weather damage is doubling every five to 10 years and this trend is expected to continue. The IIC expects significant losses over the next 10 years, with claims paid increasing from $2.1 billion a year to $5 billion.

Moreover, the Insurance Bureau of Canada (IBC) notes 2019 was the seventh most costly year on record, with $1.3 billion in insured damages because of rain, snow, floods and windstorms. IBC also says financial losses due to severe weather impacting insurance providers, homeowners, governments and taxpayers are escalating.

Mitigating flood and fire risks: preventative measures for homeowners

As you can imagine, if the cost of property claims continues to rise, home insurance premiums are sure to follow. So, what can homeowners do to reduce the risk of weather-related events on their properties?

Begin by reviewing your home insurance policy. For example, do you have adequate coverage for all perils such as floods? What is excluded? Damage by floodwater is not typically covered in a standard home insurance policy, which is why you should ensure you have optional enhancements added to your policy for overland flooding and sewer backup coverage. It never hurts to have a chat with your insurance agent or broker and ask for details about your policy.

How to floodproof your property

Taking preventative measures can help mitigate your home’s flood risk, including:

  • Ensure your home’s eavestroughs are free of blockages
  • Keep the downspouts pointing away from your house
  • Get a sump pump with a battery backup installed in your basement
  • Seal any cracks in walls, floors, windows and the foundation
  • Clear debris from grates curbside if there are any near your home to allow water to drain into a storm sewer

How to fireproof your home

Depending on whether your home is near a forest or fields or not, you may wish to consider taking a few steps to fireproof your home against the ravages of a forest fire or wildfire.

According to Natural Resources Canada, the length of the typical fire season is expected to become longer in almost every region of the country. That does not bode well for Canada – a nation rich in forests and prairie plains that are like tinderboxes waiting to ignite in dry conditions. Moreover, a 2017 study by the National Aeronautics and Space Administration in the U.S. states lightning is the driver of large fires in North American Boreal forests.

Here are a few things homeowners can do to safeguard their homes from a wildfire:

  • Rake up dead leaves, dry twigs, cut grass and get rid of dry vegetation in your front and backyard
  • Avoid planting coniferous or evergreen trees with cones and needles near your house since they are highly flammable
  • Upgrade your roof, doors, siding with fire-resistant materials and use dual-paned windows
  • Keep patio decks free of debris, dead plants, and other flammable items such as a propane tank
Liam Lahey

Liam Lahey is a versatile marketer with experience as a staff and freelance writer for many business and technology publications and newspapers. He previously worked as the editor and media spokesperson for RATESDOTCA, handling home, auto, and travel insurance topics.

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