Canadian home insurance premiums expected to jump after record-shattering year for weather-related losses

As California deals with devastating wildfires, experts are warning homeowners about the impact of severe weather in Canada this year.

A large number of victims of the Los Angeles wildfires were unable to secure home insurance because of living in what were deemed as “high-risk” areas.

Many British Columbians also live under an increased threat of wildfires and there are concerns they too could soon be unable to protect their livelihoods.

Experts warn the premiums for policies are expected to increase significantly this year.

The insurance industry says it’s grappling with record-breaking losses from extreme weather events, labour shortages in construction driving up replacement costs and wait times, and inflation.

“2024 was the most devastating year on record in Canada for severe weather events,” said Jason Clark, of the Insurance Bureau of Canada.

The IBC says there were $8.5 billion in insured losses alone, nearly triple the year prior.

Calgary’s hailstorm, Quebec’s flooding, the Jasper wildfire, and storms and wildfires in B.C. last year all added to that total.

Insurers say Canada is not doing enough to prevent disasters.

“That means investing in risk mitigation member measures. That means investing in first responders in this country, and that means investing in the corresponding infrastructure that enables us to be more resilient and prepared for the next wildfire, for the next flash flood, for the next hurricane,” said Clark.

Claims have increased 115 per cent over the last five years and the costs for repairing and replacing personal property have risen nearly 500 per cent.

“Insurance is a pooling of risk, and so when claims go up, costs go up,” said Daniel Ivans, insurance expert for Rates.ca and licensed insurance broker.

Ivans says the increases to premiums will vary depending on where you live, but expects them to be significant. However, he says having comprehensive home insurance is vital.

“There’s a concept called saving pennies to lose dollars. We’ve seen a lot of instances where houses are fully burned down or demolished as a result of forest fires, as a result of flooding, where the foundation of the home is displaced. That’s somebody’s entire livelihood that they’re putting at risk for, something that they have no control over,” said Ivans.

B.C. Conservative finance critic Peter Milobar says the potential for yet another blow to the cost of living is concerning.

“These are cost pressures that are going to be very difficult to manage for the average household. When you see 50 per cent of people are now $200 a month away from being able to meet their obligations, so there’s not a lot of room people have right now,” said Milobar.

With many in California losing their livelihoods after being unable to get insurance, the fear is British Columbians could soon be in trouble too.

“We’re confident that they’ll always be there when they’re needed because of the fact that there is such strong oversight, such strong regulation, such a close relationship with the government,” said Ivans.

But experts say that could change.

“The risk is present. It’s escalating and we want to ensure that what we see happening south of the border doesn’t happen here,” said Clark.

According to the government of British Columbia’s website, during major wildfires insurance companies may initiate temporary restrictions on the sale of new policies in areas of imminent threat.

As the threat eases, the restrictions ease as well.

“Renewals of existing policies continue to take place, regardless of the threat situation. If you are trying to purchase new insurance in a wildfire threatened area, contact your insurance representative to discuss your options,” reads the website.

“The province and BC Financial Services Authority will continue to work together to monitor the challenges homeowners and tenants face obtaining insurance and find ways to improve the availability and affordability of private insurance in B.C.,” wrote the Ministry of Finance in a statement to CTV News.

It says the Insurance Bureau of Canada can help people having difficulties finding coverage by assessing their situation and providing options.

Extreme weather is not the only factor in the rising premiums.

Statistics Canada data shows that residential building construction costs have risen 66 per cent. Home replacement costs have risen 24 per cent from 2019, compared with a 19 per cent general inflation rate during the same time period.

“The home insurance industry is experiencing record claims losses while at the same time facing the challenge of rising replacement costs. The result is likely to be higher home insurance premiums for consumers this year when their policies renew, even if they haven’t made any claims,” said Ivans.

Ivans suggests shopping around for better deals instead of just renewing your policy annually.

Home insurers are not restricted by geographical area. Homeowners may also be able to save by purchasing insurance coverage with a company that is not in their immediate location.