Why does home insurance increase every year?
If you have home insurance or have been shopping around for plans, you may have noticed that rates seem to go up every year or so. According to Canada’s Consumer Price Index (CPI), rates for home insurance in Québec have gone up by about 5% in 2022 when compared to the previous year. As a consumer, that can certainly be frustrating. Home insurance is a vital protection that home owners should have as part of their arsenal, and to realize that you’re paying more every year for the same service can definitely put you in a sour mood.
But why do home insurance rates increase every year?
One of the most obvious answers is inflation. As of March 2022, Canada’s inflation rate hovered at 6.7%, which has affected the price of all consumer goods, from groceries and furniture to insurance rates.
That’s because inflation also affects the cost of materials needed for possible repairs in case your home is damaged and you submit a claim. Say that there’s a fire in your living room after someone knocked over all those handmade candles you bought online; if you submit a claim to cover the expenses of fixing the damage, your insurance would have to cover the costs of workers and any material that’s needed for repairs. Since those things have gone up in price due to inflation, so have insurance rates.
Higher material costs
Inflation isn’t to blame for everything, however. The costs for construction, including labor and material, have gone up in recent years regardless of inflation. In 2021, labor costs in Canada went up by 4.5%, and that doesn’t even touch the cost of wood, hardware, and other items needed when repairs or renovations are made on a home.
The reason why so many of these materials have become more expensive? Well, you may have noticed that we’re currently in our third year of a massive pandemic, the likes of which none of us in our generation have ever experienced. That pandemic is causing some serious supply chain issues around the world, which means that shipping takes longer and has become more expensive. This creates temporary shortages of certain materials, which—along with higher shipping costs—causes prices to skyrocket.
Add to this the fact that many people have spent the better part of the last three years at home, and during that time may have decided to spruce their properties up a little. Both minor and major home renovations have experienced an uptick during the pandemic, meaning that there’s an increased demand for these kinds of construction materials that are already subject to struggling supply chains. And as everyone who’s taken a basic economics class knows, high demand coupled with low supply equals… much higher prices.
Another major reason why home insurance rates keep increasing is the unfortunate rise of more extreme weather conditions as climate change continues to alter weather patterns. Tornadoes, flooding, landslides, and wildfires have all become more common occurrences in Canada, thereby increasing the need for home repairs and causing insurance rates to rise. In 2021, British Columbia experienced severe flooding that left at least five people dead and caused widespread destruction. Unfortunately, these kinds of events are going to become more common as weather patterns keep changing, thereby contributing to the rising cost of insurance rates.
Despite rising rates, we at YouSet are committed to helping you find the best price for the coverage you need. Whether it’s your first time shopping for home insurance or whether you’re a busy pro looking for a change—we can help you find the best rates quickly and conveniently, with just a couple of clicks.
With YouSet, get a free online quote for an insurance that suits your needs and budget, in only 4 minutes!