The skyrocketing cost of insurance
I have been reading a lot lately about the rising costs of insurance and my wife and I have been battling with the never-ending increases over the last few years. A number of years ago I started realizing that once you insure your principal home or your rentals and even your vehicles, if you don’t continually shop for the best rates and coverage each and every year that you are a sitting duck ready for the plucking!!! We started noticing a few years back that we were being sent our renewal AFTER the insurance company had insured us again for the coming year. We let them know we were unhappy with this practice and expected our renewal to be sent to us a minimum of 30 days prior to renewal and that gave us the opportunity to shop around, get the best rate and coverage which I highly encourage you all to do.
In Canada, where we have some of the highest personal indebtedness levels of any country in the world, a lot of people probably own houses and pay for mortgages they really can’t afford so any large increase in expenditures could make it more difficult for them to pay their mortgages.
One cost that has begun putting an uncomfortable amount of pressure on some borrowers is home insurance, where industry players are reporting average cost increases of 5-10% for 2020.
The rise of both extreme weather events, which are costing the world’s insurers billions every year, and home prices, which increase the cost of insurable repairs, mean the price of home insurance will only keep rising. Anything that increases the number of claims or increases the amount of damage or frequency of damage to a home or apartment building, is going to increase insurance rates.
In LowestRates.ca’s recent report, its inaugural Home Insurance Price Index, the group compared the increase in home insurance rates in Canada’s three largest housing markets: British Columbia, Alberta, and Ontario. While the cost of insuring a house showed relatively little change in each province from the third quarter of 2019 to Q3 2020 – it dropped by 1% in Ontario and rose by 1% in Alberta and 6% in B.C. – a far more disturbing story is unfolding in the condo space, where the average cost of insurance in B.C. and Alberta rose by 16% over the period studied. (Rates in Ontario rose by 3%.)
Because of the sky-high deductibles being charged to condo corporations in B.C. and Alberta, Justin Thouin from LowestRates.ca said condo insurance “is the one we really need to be concerned about.”
“Basically, the insurance companies are saying, ‘If we want to be in this commercial business at all, we have to have a way higher deductible because we’re losing a ton of money,’” he explained. “You’re seeing a lot of the commercial insurance companies pulling out completely because they’re losing so much money on condos.”
Those increased costs are already being passed on to condo owners, who are being forced to use their personal insurance to pay for damages their condo corporation’s reserve funds aren’t deep enough to cover. “As a result, personal condo insurance claims, and prices, are going up,” Thouin said.
“In a lot of cases, Canadians are just taking money, throwing it in the garbage, and burning it,” said Thouin. “They just don’t know any better. They stay with the same insurance company for years and years because it’s what their parents have done, and they’re wasting thousands of dollars a year. It’s sad.”
Even though the insurance industry is reporting average price increases of 5-10% in Canada, Thouin said consumers who have taken the time to compare are actually saving money. You could save yourself, in this case, 5-10% just by comparing,”
In a country where financial literacy is so poor, it would seem that Canadians spend more time thinking about what colour to paint their walls than they do comparing their mortgage and insurance options.
The take away from this for you will hopefully be that EACH AND EVERY YEAR you will now shop your insurance on everything that you need to insure and if at all possible, put those savings towards your mortgage so you can save even more money. Remember the compounding effect of money saved and reinvested. Your future depends on it!!!!
By the way, I always appreciate referrals and my promise to all is that I will take good care of the people you entrust me to look after.
Brian McCullough, RE/MAX of Nanaimo
#1-5140 Metral Drive
Nanaimo, BC V9T 2K8
Office: (250) -751 – 1223