How Climate Change Is Affecting Your Home Insurance

 The record-breaking heat dome that recently roasted much of Western Canada and contributed to the blaze that levelled Lytton, B.C. Was an anomaly, but perhaps not for long. Extreme weather events are rarely attributed to a single factor, but scientists who analyzed the devastating heatwave say it would have been “virtually impossible” without human-caused climate change. 

Canada is warming twice as fast as the rest of the world, according to a report by the federal government in 2019. The highest temperature increases are in the North, the Prairies and northern B.C. Over time, we’ll see more precipitation, snowstorms, wind, hail, floods, droughts, smog, wildfires and, yes, extreme heat events. That means more weather damage to infrastructure, businesses and homes—and a corresponding rise in insurance claims.

Between 2009 and 2020, Canadian insurers spent an average of $2 billion annually on losses related to natural catastrophic events (those resulting in insured losses of $25 million or more)—more than four times the average of $422 million paid out annually from 1983 to 2008, according to the Insurance Bureau of Canada (IBC). Canadians are no strangers to severe weather, but something has shifted in recent years, says Vanessa Barrasa, IBC’s manager of media relations. “The impacts of these events are being felt more strongly.”  

Get personalized quotes from Canada's top home insurance providers. Other factors shaking up policies

Although they’re not weather-related, earthquakes are another natural disaster we can’t ignore. Canada averages over 4,000 per year, most too small to be felt, says Barrasa. British Columbia is most prone to earthquakes, but they’re also frequent in the Ottawa and St. Lawrence valleys, in New Brunswick and off Newfoundland. “A large earthquake near a populated area could cause a significant amount of damage—affecting local and national GDP,” says Barrasa. (Earthquake home insurance is available—ask your insurer.) 

Will you need climate change insurance?

Many factors impact the insurance market—from low interest rates to the rising cost of building materials—so it’s difficult to say how climate change is affecting your home insurance on its own, and separate weather home insurance isn’t a thing (not yet anyway). 

What we do know is that certain areas of the country are at higher risk of flooding, fires and other extreme events, and premiums are priced accordingly. That said, no one is immune to weather damage or its financial impact. “Canadians from coast-to-coast-to-coast are at risk,” says Barrasa. “Of the top 10 catastrophic events in Canada, six occurred in Alberta, and the remaining four in Ontario, Quebec and Atlantic provinces.”

Does your home insurance policy cover floods? 

Weather-related perils covered by standard home insurance policies usually include wind, hail, fire and lightning. Certain kinds of water damage are also covered—but typically not flood damage or water damage caused by floodwater, to the surprise of many Canadians. Landslides, avalanches, earthquakes and other earth movements are also not automatically covered.

However, home insurance is evolving with the times. Water is now Canada’s top cause of property damage. In response, a few insurers—such as Aviva, Intact, Pembridge and Unica—now offer overland flood insurance coverage, first introduced in 2015. It’s available to over 90% of consumers, and over 60% have purchased it. Added separately to a home insurance policy, overland flood coverage costs about $10 to $30 per month.