For how long will condo insurance rates continue to climb?
6 minute read Published on Jun 27, 2024 by BrokerLink Communications
Unfortunately, rising home insurance costs in Canada don’t look like they will slow down any time soon. Even though the Bank of Canada expects inflation to return to 2% by 2025, the high cost of claims, the rising expenses for rebuilding and repairing property, and the increasing frequency and severity of natural disasters are all making home insurance, including condo insurance, more expensive in 2024.
Why are home insurance rates continuing to climb in 2024?
The Insurance Bureau of Canada reported that in 2023, for the second year in a row, Canada had more than $3 billion in insured damage from natural disasters and bad weather. The total insured damage from severe weather events in 2023 was over $3.4 billion. In 2022, it was $3.1 billion. When adjusted for inflation, five of the worst years for insured losses in Canada’s history have happened in the last eight years, with four of them being 2020 to 2024. Continue reading below to learn why insurance rates keep rising in 2024:
Soaring residential construction costs
Building costs to completely rebuild a house have gone up by 23% since January 2019, and home maintenance and repair costs have increased by 18%. Both of these increases are higher than the core inflation rate during the same period. Most notably, the cost of residential building construction, the total cost for materials, labour, equipment, overhead, and profit for a new building has skyrocketed by 61% since January 2019.
These major cost increases are one of the biggest reasons that home insurance premiums are going up. The reason is simple: if inflation makes home repairs and replacement costs more expensive for insurance companies, they will need to charge you and other customers higher home insurance prices.
Increasing natural disasters
Each year, the insurance industry struggles more with covering losses from wildfires, floods, and other climate-related events. This forces them to adjust rates to keep up with the increasing risk.
According to the Insurance Bureau of Canada, most of the high claims costs and insured losses from natural disasters (approximately 60%) came from home insurance claims. Before 2016, which was a very bad year for wildfires in Western Canada, the average yearly losses for personal property due to natural disasters were $990 million, with around 57,000 claims each year.
However, between 2017 and 2023, these numbers increased significantly. The average yearly losses for personal property due to natural disasters went up to about $1.55 billion, with 89,000 claims each year. This is a 56% increase in average yearly losses.
After a warmer 2023-2024 winter, experts are warning that Canadians should prepare for extreme weather events in the spring and summer, such as droughts, wildfires, and floods.
And speaking of wildfires—last year, Canada had a record-breaking wildfire season, burning about 18.5 million hectares of land. If this continues and more losses happen this year, it could lead to even higher home insurance rates.
More severe global weather events
The Insurance Bureau of Canada also says that extreme weather events around the world are adding to the cost pressures on insurance in Canada. Canadian insurers use global reinsurers (also known as insurance for insurers) to help manage the financial risk from major events.
However, because of increasing losses from catastrophic events worldwide, some reinsurers have changed how they handle these risks. Many have reduced their capacity and increased the cost of reinsurance in high-risk areas, including some regions in Canada. This has led to higher reinsurance costs, adding to the home insurance inflation pressures in Canada.
Where is property insurance rising in Canada?
According to a report published by MyChoice Financial in March, the impact of rising home insurance prices will vary across Canada, with some provinces facing bigger effects. Since January 2024, home insurance costs have increased an average of 7.66% in Canada since January 2023. Here’s a breakdown of each province:
- Saskatchewan: 12.16%
- Manitoba: 11.31%
- Alberta: 9.25%
- Newfoundland: 8.53%
- Nova Scotia: 8.27%
- Quebec: 8.02%
- British Columbia: 7.63%
- Ontario: 6.32%
- New Brunswick: 2.39%
- Prince Edward Island: 0.88%
Home insurance predictions are expected that these increases will continue through 2024.
Factors that impact your personal condo insurance rates
Insurance providers look at the specific features of your unit to decide the cost of coverage. Usually, the higher the risk or potential cost for repairs and replacements, the higher your condo insurance premium will be. Here are some other factors that will affect what you pay for condo insurance:
Where you live
The location of your condo can impact the cost of insurance. Areas prone to natural disasters like floods or earthquakes and places with high crime rates usually have higher insurance premiums.
The condominium’s structure
The age of the building, the materials used, and safety features like fire alarms and sprinkler systems can also affect insurance costs. Newer buildings with modern safety features may have lower premiums compared to older buildings.
The size of your unit
The size of your condo unit also plays a role in determining the cost of insurance. Larger units typically cost more to insure because they have more space that could potentially be damaged and require repairs or replacements.
Your personal belongings
The value of your personal belongings inside the condo also affects the insurance cost. If you have high-value items, like expensive electronics or jewellery, you might need additional coverage, which can increase your premium.
How does condo insurance protect you?
In Canada, condo insurance is not legally required. However, you will need it if you are applying for a mortgage through a lender. Condo corporations can also require you to carry it.
Nevertheless, we strongly recommend getting condo insurance. With $3.4 billion in insured damage due to severe weather events in 2023, condo insurance can be extremely beneficial to have, especially if you live in an area at high risk for severe weather. Otherwise, you’d have to pay out of pocket for any damages or repairs to your condo unit.
But condo insurance can do more than just protect you from severe weather. Here’s how it can protect you:
Personal liability coverage
Personal liability coverage protects you if you are legally responsible for injuring someone or damaging their property. It acts as a safety net in case an unexpected accident happens in your condo and you are held liable.
For example, if you accidentally leave your bathroom tap running and it floods your neighbour’s unit, causing water damage to their belongings, personal liability insurance will cover the costs of the damage you caused.
This insurance generally covers a wide range of accidents, including unintentional injuries inside your unit. It also pays for legal expenses if you are sued. Depending on your policy, it may also cover injuries you cause to someone in shared areas of your building.
Personal belongings coverage
Personal belongings coverage, also known as contents coverage, protects your personal items in case of theft, damage, or loss. While the condo association’s insurance covers the building and common areas, you need personal belongings coverage to protect the items inside your unit.
This coverage typically includes things like furniture, clothing, electronics, appliances, and other personal items. It will pay to repair or replace your belongings if they are damaged or stolen, up to the limits set by your policy.
Additional living expenses
Additional living expense coverage provides financial help if your condo becomes unlivable due to a covered event. This coverage helps pay for extra costs while you temporarily live somewhere else during repairs or reconstruction such as hotel bills, cost of eating out or additional transportation costs to go to and from work.
Tips to lower your condo insurance premiums
Even though the cost of condo insurance is continuing to rise, there are some ways you can help lower these costs. Here are some of our expert tips to help you out:
Compare quotes and shop around
Don’t go with the first quote you get. Get quotes from several insurance companies to compare costs, coverage options, and discounts. You can also use a broker who can compare all these factors for you. They can help you find the most affordable policy that meets your needs.
Bundle your policies
If you have other types of insurance, like auto insurance, consider combining them with your condo insurance policy. Many insurance companies offer discounts for bundling multiple policies, which can save you a lot of money.
Stay claims-free
Insurance companies look at your claims history when setting premiums. Avoiding making claims shows the insurer that you’re a low-risk customer, which can lead to lower rates. So, if you’re thinking about making a small claim for something, consider whether you can handle it on your own to keep your insurance claims-free.
Ask about discounts
Ask your insurance provider if you qualify for any discounts. Common discounts include those for long-term customers, age-related discounts, and discounts for membership in certain professional organizations or employers.
Partner with a local insurance broker
Work with a local insurance broker who knows the market and can help you find the best deals. Brokers can compare policies from different companies and provide personalized advice to help you save money.
Contact BrokerLink for condo insurance
Since 1991, the BrokerLink team has been dedicated to finding insurance policies that meet the needs and budgets of our customers. We are experts in all things condo insurance and can ensure you receive the most competitive rate on your policy.
You can reach us by phone, email, or in person at any one of our locations throughout Canada. No matter how you choose to get in touch, a BrokerLink insurance advisor will be happy to assist you. We also encourage you to take advantage of our free online quote tool that can provide you with a competitive quote in minutes.