Home insurance bills will be higher in 2025 due to severe weather: experts

As extreme weather events lead to the largest year on record for insurance claims, home insurance rates are on the rise.

In 2025, home insurance rates have risen 5.28 per cent, well above the rate of inflation, according to a report published by My Choice Financial, a Canadian insurance aggregator and comparison website.

This rise follows the previous year’s increase, when rates rose 7.66 per cent.

While there are several factors, insurance experts say climate change is a major driving force.

“It’s driven historic insured losses across the country. Particularly, we had a very severe single quarter in 2024 where we saw over $7 billion in insured losses in that single quarter last summer,” said Jason Clark, the national director of climate change and federal issues at the Insurance Bureau of Canada.

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The Insurance Bureau of Canada reports record-breaking losses of $8.5 billion paid out in 2024, triple that seen in 2023, and 12 times the annual average between 2001 and 2010.

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Meanwhile, 2024 also surpassed the previous record of $8 billion set in 2016 following the Fort McMurray wildfires in Alberta.

“What we’re seeing is the level of risk across the country is increasing, whether that’s the threat of hurricanes in Atlantic Canada, hailstorms in Alberta, or wildfire across the county. The costliest and most severe event we experience in Canada is flooding,” Clark said.

Clark said that approximately 1.5 million homes in Canada are not eligible for flood insurance because the flood risk is too high.

A national flood insurance program for high-risk households has been in the works by the Canadian government for several years, with money toward it committed in the 2024 budget, but Clark said it has not been implemented because Parliament was prorogued.

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Mary Kelly, a professor of finance at Wilfrid Laurier University, said that with the increase in weather events, “everywhere in Canada can now be a danger zone,” leading to insurance rates increasing nationwide.

“Insurance companies are saying, even though you live in a safe place, you could have one of these microbursts, these rainstorms that the sewage system can’t handle, and your house can be flooded. So I think that is the reality, that there’s nowhere in Canada right now that is really safe,” she said.

Kelly is also a big supporter of the need for the government to fill the gap where private insurance cannot.

“We’re one of the few countries in the world where the government has no part of covering insurance,” she said.

Kelly points to the example of California, where government programs have stepped in to help people needing earthquake coverage when private companies deem the risk too high.

“What we will need to see in the future for insurers to continue to offer their products is to have some sort of government commitment to come and say, if things are really, really bad, we’ll provide a backstop so you don’t go bankrupt,” Kelly said.

Kelly also recommends that homeowners take a proactive approach to making their homes more climate resistant and understand the potential risk by looking at the Institute for Catastrophic Loss Reduction site for recommendations.

However, both Kelly and Clark feel more action is needed to address climate change and invest in mitigating potential disasters from it by all levels of government.

“There is a pressing need for us collectively to focus on climate adaptation and look particularly to all levels of government to make investments in community risk protection,” Clark said. “This is a clear set of challenges that we’re seeing as a result of this rising risk, as a result of changing weather patterns, and as a result of these costly and severe events that folks are experiencing all across the country.”

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