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The weather’s been so terrible—floods, ice storms. What’s going to happen to my home insurance?

October 8, 2014

With all of the crazy weather Canada has experienced this last year I have often been asked the same couple of questions. The first question is “do you think home insurance premiums will increase in 2014?” My answer to this is yes. If my personal property insurance policy is indicative of the rest of Canada, then it’s likely that Canadians will see an increase in their home insurance premium of around 20 per cent.

The cost of 2013 storms in Canada is estimated to be in excess of $2 billion.

  • The storms that swept through Alberta last June caused $1.7 billion in insured damages, making it Canada’s costliest natural disaster, according to the Insurance Bureau of Canada.
  • A smaller flash flood in Toronto in July resulted in $940 million in damages, while an ice storm that hit Toronto and other parts of Ontario and Eastern Canada in December cost insurers $200 million in damage to homes.

To offset these losses, Canada’s largest insurance company began to raise premiums, typically by between 15 and 20 per cent. That’s about what I saw with my renewal, and I wouldn’t be surprised if it’s what you see in yours.

The second question that I’m often asked is “will my home insurance coverage change in 2014?” Again, if my personal policy is typical of the rest of Canada, my answer is yes, coverage will change. It will likely be reduced.

My insurance company reduced the limit of coverage I would receive under the ‘water damage extension’ section of my policy. I have always purchased water damage extension coverage (sometimes called “sewer back-up coverage”) on any home insurance policy that I have had.

In the past this coverage had no deductible (that portion of a claim that I’d have to pay) and I was protected up to the total amount of coverage on my policy. Both, have since changed.

When I got my 2014 policy renewal, the company placed a limit on any damage paid out under this section to $25,000, plus it implemented a deductible of $1000. I am able to purchase a higher limit so that I have more than $25,000 in water damage coverage, but if I buy it my premiums will go up even more.

So, in addition to the 20 per cent increase if I want similar coverage to that which I had in 2013, it will end up costing me approximately 30 per cent more–20% for the premium increase and at least 10% more to purchase additional water damage coverage.

Of course, I shopped my rate (naturally, I used InsuranceHotline.com) and was able to find a lower home insurance premium but it’s still more than I was paying in last year and the coverage is still a little less.

Like you, I don’t like insurance premium increases. However when I consider that my friend’s insurance company paid almost $60,000 when her home was affected by the July 2014 flood in Toronto-I’m OK with paying the premiums.

Ask the Expert. Anne Marie Answers

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  • Terry Proveau

    So now your friend would be in trouble having only 25000 limit on water damage and 60000 in damages! And premiums increase 20% because of one or two years of unusually high weather events. Then if weather settles down for the next 10 years with more normal claim amounts our home insurance will still likely see rates stay the same or go up! It’s greed that seems to fuel the insurance industry. I have been paying a mortgage for 12 years on my townhouse. My insurance rates have about doubled in that time! My family income has changed only slightly and is going down next year when we retire. We will most likely sell the house within a year and rent an apartment as it is not sustainable to continue living in our home, the mortgage and bills have gotten too high! Seven more years paying the mortgage is just too long I fear.

  • Elwin

    If an insurance company reduces its coverage on water damage due to the increased flooding, isn’t it responsible to inform its clients when these changes in coverage take place?