‘This is a huge shock to us’: What climate change means for home insurance
When Leanne Johnston considered home insurance options for her brand new home some six years ago, a $5,000 deductible seemed to make a lot of sense on $2 million worth of coverage.
Coming up with that kind of cash wouldn’t have been an issue at the time, Johnston, who works at a benefits consulting firm, told Global News. And her parents’ advice echoed in her head: “Never ever make a claim” — unless you absolutely have to.
Johnston reckoned she might never need to use her insurance, anyways.
But that all changed on May 4, when a freak windstorm ripped through the Greater Toronto area including Johnston’s backyard near the Scarborough Bluffs, at the eastern end of the city.
Johnston and her husband came home to find that the wind had uprooted four out of their five large, healthy trees. In falling, they had smashed a 100-foot fence as well as the family’s shed and a large Costco playground.
With two kids in daycare, $5,000 suddenly seemed like a lot of money to pay to get the insurance to kick in.
“This is a huge shock to us,” Johnston told Global News.
Expect to make more frequent claims
Many Canadians may soon experience what Johnston is going through, experts told Global News.
With extreme weather becoming more and more common, the probability of having to make several, relatively lower-value insurance claims is going up, according to Blair Feltmate, head of the Intact Centre on Climate Adaptation at the University of Waterloo. And so is the risk of living through a life-wrecking event, of the kind that makes $100,000 worth of damage to your basement, he added.
READ MORE: Photos: Ice storm slams southern Ontario
“The weather and experiences of the past are [no longer] a predictor of the weather and experiences of the future,” Feltmate told Global News.
Homeowners should opt for policies with lower deductibles and higher coverage limits, he said. The math will likely work in your favour even knowing that your premiums rise after making a claim, he added.
That, though, may be pricey. Insurance premiums, in general, are going up because the frequency of claims is increasing, said Anne Marie Thomas of InsuranceHotline.com, an insurance comparisons site.
And when it comes to water damage, there is often a separate deductible and coverage cap, she noted. That’s because coverage for things like overland flooding (when water seeps through doors and windows) and sewer backup (when sewage spills over due to clogged pipes) require separate, add-on policies.
The frequency of damages from wind, fire and ice has gone up — flooding is the No. 1 most expensive source of home insurance claims, according to Feltmate.
“Water is the new fire,” he said.
Every spring, it seems, rivers from New Brunswick to British Columbia are overflowing and leaving a path of destruction behind them. And even Canadians who live nowhere close to a body of water are coping with freakish downpours that often overwhelm old city pipes, causing damages that can easily reach in the tens of thousands of dollars.
A flooded basement costs an average of $43,000 in major cities, Feltmate said.
WATCH: Here’s why cities flood more easily than rural areas
Expensive, spotty and fickle coverage
Canada is catching up when it comes to flood insurance. The country got a wake-up call in June 2013, when heavy rainfall in Calgary turned into the worst flooding in Alberta’s history.
Since then, overland flood insurance has become available and sewer-backup coverage is now more widely available.
Still, the price of peace of mind, when it comes to water damage, is steep.
While deductibles on plain-vanilla home insurance policies usually go from $500 to $1,000, it’s common to see deductibles in the $5,000-$10,000 for sewer backup coverage, Thomas said.
Premiums have gone up, too. She remembers paying an additional $50 per year for sewer backup insurance for coverage up to the limit of $200,000 on her main policy. Today, the same kind of water damage coverage on that house costs $350 a year and the limit is $40,000.
WATCH: Flood insurance is becoming increasingly vital
Even if you’re ready to fork out the money, though, you might not be able to get the coverage you need.
“From Halifax to Victoria, we’re seeing growth in the uninsurability of homes,” Feltmate said. “People who can’t get insurance because the frequency of flooding is too high.”
This has led Feltmate to expect a spike in mortgage defaults in areas that suffer through multiple floods, wildfires, ice storms or other types of cataclysm.
A homeowner may be able to foot the bill for a flooded basement once, he reckons, but probably not two or three times.
A wave of mortgage defaults, especially in flood-prone areas, “is the next show to drop in Canada,” he told Global News.
But even those who initially get coverage become uninsurable. Insurance providers have become skittish about water damage claims, in particular. Making a claim for something like sewer backup might result in your insurance denying you further coverage, Thomas said. And finding another provider willing to offer you a policy can be tricky, she added.
Unlike car insurance, home insurance in Canada is lightly regulated, meaning that insurers have ample latitude to charge whatever they like and offer coverage as they see fit, Thomas said.
As for Johnston, she and her husband decided not to use their insurance. They plan to cut up the tree and clean up their backyard themselves and will rebuild the fence with help from the neighbours, who have also pitched in for half of the cost of the raw material. With that, the Johnstons’ overall cost should come in right around $5,000.
“We’re pretty easy going, we take life as it comes,” she said.
However, she added, “For the last tree that remains — it does make me nervous that my children are now playing in the backyard.”
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