Each year, insurers pay out a high percentage of their revenues in claims. In 2022, that figure was 55%, according to the Insurance Bureau of Canada (IBC). Where are all those payouts going towards?
Read on to find out.
Home insurance
Many common home insurance claims are a result of intensifying weather events related to climate change. Learn what’s covered and how to spot common culprits.
Hail
Hail is becoming a bigger and bigger factor in insurance payouts, especially as the result of more severe weather events. While these icy pebbles may not seem too damaging, they can wreak long-lasting havoc on roofs and house sidings, creating holes where mildew and mold to fester. Larger hailstones can break windows or put holes through your roof.
Over the past decade, there have been numerous major hail events (sometimes several in a year, and particularly in the prairie provinces) that have led to millions of dollars in insurance payouts. Insured losses in 2022 totaled $3,406,154, an increase of over 37% from the year prior. To avoid hail damage, make sure your roof is regularly maintained, and always check your property for signs of trouble after a severe hailstorm.
Trees
Insurance coverage for damage caused by trees is a complicated subject. Your insurance may or may not cover damage caused by wind or storms, which is why it’s always best to read the fine print of your policy.
Unfortunately, over the past few years, hundreds of millions of ash trees (a popular street tree) across North America have been destroyed by the emerald ash borer, an invasive species of beetle that saps nutrients from trees. If the trees are left to rot, all it takes is a strong wind to snap off a decayed branch, which can cause property damage or injury.
When it comes to dealing with a fallen tree, the issue of responsibility is not as clear-cut as it might seem – even if the tree was on your property, or on a neighbour’s property. The best way to minimize tree damage is by spotting early signs of tree decay and removing the tree before disaster strikes.
Theft/robbery
A residential break-in happens every 90 seconds in Canada, and more than 80% of break-ins occur during daylight hours. Most standard home insurance policies cover theft, but you may need to purchase additional coverage for high value items such as jewelry or fine art. Additionally, any personal belongings that are stolen from your vehicle (such as a laptop or cell phone) are typically covered by contents insurance, which is part of your home, tenant, or condo insurance policy.
Water damage
The highest amount of money paid out under home insurance policies is for water damage. CAA estimates that water damage accounts for half of all home insurance claims in Canada, due in part to incidents of severe weather, with floods being the costliest natural disasters.
Water damage generally falls into one of two categories: Outdoor flooding and indoor flooding.
Outdoor flooding
Residential property owners bear approximately 75% of uninsured overland flooding losses each year. Overland flooding occurs when bodies of freshwater, such as rivers or dams overflow onto dry land. It is typically not covered by a standard policy, although optional residential overland flood coverage is now offered by many insurers for the majority of homes across the country.
However, flood damage due to storm surge or tidal waves are not covered by most policies, nor by optional endorsement.
The government of Canada puts the total residential flood risk in Canada estimated at $2.9 billion per year. It also notes that flooding has caused approximately $1.5 billion in damage to households, property and infrastructure in Canada annually in recent years (approximately $700 million in insured losses and $800 million in uninsured losses).
Indoor flooding
Indoor flooding events consist of things like bathroom leaks, toilets and showers that don't drain, corroded pipes, and aging fixtures. These types of issues can all lead to insurable losses. One particular issue for those living in cities to be mindful of is sewer backup.
The infrastructure of many cities cannot keep up with the water from increasing extreme weather events, causing water to back up into buildings. One way to mitigate this risk is to install a backwater valve. Additionally, optional sewer backup coverage is offered by most insurers.
Related: Can your home insurance provider stop covering your water damage claims?
Car insurance
Unlike home insurance, car insurance is mandatory for all drivers, and for good reason - by far, most of the money paid out in claims was in the auto insurance sector. Here are the biggest auto claims paid out by insurers.
Car theft
In 2022, over 105,000 vehicles were stolen across Canada. Ontario was particularly affected, with losses exceeding $700 million province-wide, including over $500 million worth of vehicles stolen in the Greater Toronto Area (GTA) alone. Auto theft falls under your vehicle’s comprehensive insurance coverage.
Medical expenses following an accident
Most individuals who have been in a car accident know it takes a toll on health. While some medical expenses are covered by provincial plans, insurers take on a substantial cost when it comes to rehabilitation, including everything from psychiatry to orthopedic surgery. According to the latest Ontario Health Claims Database Report, auto insurers paid out almost $348,600,000 on medical and rehabilitation claims in 2022.
Repairs and windshield cracks
Vehicle repairs are taking longer and costing more, thanks in part to an increase in the number of repairs overall, combined with a shortage of qualified technicians and more expensive and sophisticated car parts.
But one of the most common repair claims is also among the simplest to insure.
If you have comprehensive insurance, your provider will typically cover the cost of repairing chips or cracks in your windshield, often without requiring you to pay a deductible. This is because it's cheaper for them to fix minor damage before it worsens. Since 90% of chips eventually become cracks, insurers prefer to address these issues early. However, you should always double check that your policy includes windshield damage coverage.
When should you file a claim or pay out of pocket?
Deciding whether to file an insurance claim or pay out of pocket for home or auto repairs depends on a couple of factors, primarily your deductible.
If the cost of repairs or replacement significantly exceeds your deductible, it's usually beneficial to file a claim. For small repairs where the cost is less than or only slightly above your deductible, paying out of pocket might be more cost-effective in the long run to avoid potential premium increases.
Second, if you've recently filed multiple claims, filing another could lead to higher premiums or even policy cancellation. Paying out of pocket might be preferable in these cases. On the flip side, for accidents or incidents where you might be held liable, filing a claim can provide protection against potential lawsuits or additional expenses.
Know your insurance: compare rates and coverages
Ultimately, prevention is the key to avoiding making any claims at all. Theft-proofing your car, maintaining your roof, and routinely monitoring your property for diseased trees and other precautionary measures can go a long way to keeping you safe, secure, and free from sharp premium increases.
Whether you're a first-time homeowner, a new driver, or a seasoned insurance consumer, you can learn more about your coverage options and compare rates on RATESDOTCA. No matter what risk applies to you, you deserve to have the coverage that protects you and your family.
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