Climate Change & Its Impact on Your Home Insurance Rates

Climate change is the result of human-driven greenhouse gas emissions that has led to widespread weather pattern shifts and global warming. In Canada, we have seen the impact of climate change in multiple areas. Did you know that your home insurance may also have taken a hit? That’s right – severe weather as a result of climate change may be causing your home insurance rates to increase.

External factors that impact your insurance rates cannot be influenced by any one individual. However, few people reason that “external factors” can be from anywhere else in the country – or even in the world. As an example, a hailstorm in Calgary could impact your insurance rates in Ontario because insurers are impacted by global losses.

A recent storm that swept through Saskatchewan and Regina at the beginning of September brought with it golf ball-sized hail and powerful winds. There were roughly 6,123 auto claims by the next week and around 1,135 property claims.

Increases in severe weather may be increasing your rates

One of the consequences of climate change and the “heat dome” we are experienced globally that has caused unpredictable weather patterns is countless instances of severe weather, especially in Canada where temperatures are rising almost twice as fast as the rest of the world. While B.C., the North, and the Prairies have all seen the worst of the temperature fluctuations and weather events, Ontario has also been impacted. In the last decade, Canada has seen record-breaking wildfires, hailstorms, high winds, floods, droughts, and snowstorms. This has caused mass amounts of damage to residential properties but also commercial infrastructure and buildings, and consequently a rise in insurance claims.

Even if you haven’t made a claim recently, the insurance market has been impacted which will cause your rates to be affected as well. If you live in an area that is at a higher risk of fire, flooding, or any other extreme weather event, your rates will be priced higher to match. Even if your area is lower risk, no one is completely safe from weather damage. Just check out these extreme, record-breaking weather stories lists from Environment Canada.

Will your home insurance cover you for instances of extreme weather?

Premiums aside, weather damage due to extreme weather events like fire, flooding, hailstorms, etc. can be devastating to infrastructure and residences. Most weather-related perils are covered by home insurance premiums, with the exceptions of flood damage or water damage that has been caused by flood damage. Earthquakes and other earth movement-related events, like avalanches or landslides, are not always covered automatically.

Some insurance carriers may offer the option of purchasing endorsements for weather events not covered by your basic home insurance policy, but your geographical location may exclude you from coverage. Talk with your insurance broker if you believe you would benefit from an earthquake or flood damage endorsement. Typically, the addition of a rider like flood coverage – so long as you qualify and don’t live in a high-risk area – would cost an additional $10 to $30/month.

You could live in a climate-risk area and not know it

Unfortunately, Canada’s approach to assessing the climate change risks of certain geographical locations is outdated and may mean that many Canadians are currently living in high-risk areas – but don’t know it. Severe weather events are increasing in frequency, including wildfires, flooding, and more. In Ontario, flooding plays a significant role in its threat to homeowners. Accordingly, around 650,000 Canadian homes are at risk of river flooding and around 325,000 are at risk of flash floods.

Lenders and banks do not disclose physical climate risk to residential properties. There is little concept of how large the growing risk of climate change is for many areas. Climate-change related expenses for infrastructure repairs are currently on a trend of rising to tens of billions of dollars per year, unless there is an effort to take the risks into account.

Think before you renew

In a time where you may be paying more for your home insurance than you would like to, it might be a good idea to review your policy before you renew it.

You may also consider purchasing endorsements or add-ons at this point as well. Depending on your risk, you may not qualify for some options. If you have any questions, be sure to discuss them with your insurance broker and ask about these options or, if you are concerned, consider changing providers to a company that will insure you against these particular perils.

Other ways to reduce your home insurance premiums

Unfortunately, no one person can reverse the impacts of climate change and its consequences to our home insurance premiums. Living sustainably, lowering your average mileage or opting for public transport wherever possible, and generally being mindful about waste are great ways to contribute to the fight against climate change but they may not reduce your home insurance premiums. Here are some ideas for if you are looking for ways to make your rates more affordable:

• Lump together multiple policies through a single provider to qualify for a discount.
• Ask about other discounts you may be eligible for.
• Reinforce your home to be more weather-resistant, i.e: storm shutters, sealed doors, etc.
• Install a security system or burglary alarm.
• Raise your deductible amount.
• Trim the fat – review your coverage to see if you need every option you have.

Discuss with an insurance broker if you are still unsure about how to reduce your rates. They may be able to offer some suggestions that pertain to your circumstances as well as offer ways you can mitigate your exposure to weather events.

Concluding thoughts about climate change and insurance

COVID-19 was a hit to many individuals globally and to the insurance sphere. However, with severe weather events on the rise and the repercussions of a pandemic to deal with, there’s less clarity about where the future is headed. One thing is for certain: costs for severe weather-related claims are bound to rise, and it raises a lot of questions about the outcome on premiums and coverage availability in certain areas of Canada.