What to know
- An insurance expert says homeowners can still face significant out-of-pocket expenses after extreme weather due to deductibles, coverage limits and uninsured damage, even if they have insurance.
- As severe weather becomes more frequent, insurers are adjusting coverage, with some limiting payouts or narrowing protection for risks such as water damage depending on where a home is located.
- Statistics Canada found catastrophic weather claims reached $8.6 billion in 2024, while every $1 in insured losses can generate an additional $2 to $4 in uninsured costs for governments, businesses and communities.
- Experts recommend homeowners compare insurance policies annually, look for discounts, bundle home and auto insurance, and ensure they have coverage suited to their property’s climate risks.
As climate change continues to fuel extreme weather events, one insurance expert is explaining why homeowners should be prepared to face more out-of-pocket uninsured expenses, even if they are insured.
Canada is already feeling the effects of climate change, with increased heat waves and extreme weather events, from flooding to wildfires.
A report from the Government of Canada revealed that Catastrophic (CAT) claims caused by severe weather significantly increased in 2024, resulting in $8.6 billion in costs across the country.
Read More
In addition, a new Statistics Canada analysis states that for every $1 in insured costs resulting from extreme weather, businesses, governments and communities have to deal an additional $2 to $4 in out-of-pocket, uninsured losses.
According to Rates.ca insurance expert, Daniel Ivans, this also puts the pressure on homeowners to prepare for more costs after increasing storms, floods, or fires led by climate change.
Why do insured homeowners still have to pay out of pocket?
If insurance is there to help homeowners recover from major losses, then why is it they might still have to pay out-of-pocket expenses?
Ivans explains that although insurance is still imperative to help homeowners deal with damage from extreme weather, they don’t eliminate all financial exposure. Even though some costs can be paid by insurance, homeowners still have to face deductibles, which might leave them with extra costs after these events.
According to him, there are two types of uninsured costs:
- One includes when a homeowner doesn’t have the insurance needed to cover a specific claim
- The other includes other structural or communal costs which are not insured or different from the provided coverage, including, for example, sewage systems.
“Uninsured cost obviously also includes damage to municipal structures like sewers and things like that that aren’t necessarily borne by individual homeowners, so there are uninsured costs that don’t have a direct impact on consumers,” he explained.
Different types of weather damage are also covered in different ways in some insurance policies, meaning that deductibles and costs might be different when it comes to flooding compared to wildfire damage.
In addition, as homeowners face the pressure to upgrade their home infrastructure to restore damage, adhere to local bylaws, or prevent further damage, they should be aware that not all of these costs are paid by the insurance company, as policies contain coverage limits.
Read More
Insurance companies adapt to changing weather conditions
As climate change advances, extreme weather events, such as heavy rains, floods or wildfires, also become more common. This more common occurrence of these events is changing the ways in which insurance companies assess coverage of these events.
“What you’ll see in some instances is insurance companies might have limits on the amount that they might pay out as a result of, for example, water damage. Other insurance companies might limit the types of water damage that they specifically cover,” Ivans explained.
In addition, the location of a home might also lead to further costs for homeowners, as certain areas are more prone to extreme weather damage than others. According to a Statistics Canada report, rural neighbourhoods and small towns are more likely to experience flooding than large urban centres.
The Rates.ca Ontario Home Insuramap outlines what areas in the province are at higher risk of certain weather conditions. Considering the location of a home and its risks can be important for homeowners to analyze the type of insurance coverage they currently have and adapt from there to avoid future extra costs.
How can homeowners prepare?
Ivans warns homeowners to thoroughly review their insurance policies and make sure they are covered to avoid extra costs.
Whether they are a new homeowner looking for their first policy or someone who already has coverage, the expert says the best way to decrease expenses is to shop around and consider the different options available.
“If you see your rates going up, it may be a situation with your particular provider, and the best way to see the most dramatic savings is to shop on an annual basis, so pop online, do a quote, see if there’s someone with similar coverage. It’s usually the quickest and easiest way to save,” he said.
For new homeowners that are looking for new insurance, Ivans also recommends doing research about any available discounts. According to him, first-time homeowners who previously had insurance coverage as renters might be able to negotiate discounts when acquiring a new policy as an owner.
In addition, those that already have insurance coverage might also be able to maximize savings by combining different insurance policies.
“The biggest ones out there, the multi-line discount, this is where you bundle your home and auto together. Usually, we can see anywhere between 10 and 25 per cent off by doing that. Bundling multiple properties together in some cases can get you discounts, and then, of course, mitigating measures can help a lot too with bringing home insurance rates down.”
