Top Ways How Climate Change Is Affecting Your Home Insurance
You cannot control it. Indeed weather is monitored, and nobody can prevent the occurrence of floods, fires, and hailstorms. All such catastrophic events are now becoming quite common in Canada and are affecting the cost of your home insurance. Do you wish to know how? Read out this informative blog and become insurance-savvy.
Impact of Climate on Home Insurance
According to World Meteorological Organization, natural disasters have increased in frequency primarily on climate change. There have been heatwaves, golf-sized hailstorms, and even earthquakes and hurricanes that have laid a severe impact on humanity.
Furthermore, such events also increase the cost of home insurance policies by making the premium more expensive. Let us see four different ways in which climate is affecting home insurance:
1. Premiums Going North
Generally, you should purchase a standard or general home insurance policy that protects your house and belongings from fire, wind, lightning, and hails. Most policies do not cover climate-based events, like earthquakes and floods.
Thus, if you live in an area or zone susceptible to such natural disasters, you would prefer to cover them via your home insurance policy. But be ready to shell out some extra bucks, as the premium would be higher.
It happens because the insurance company assumes a higher risk by insuring your house and belongings in a region that frequently faces such catastrophic events.
It increases the probability of obtaining an insurance claim and makes the insurance companies compensate themselves by charging a higher premium.
2. No Policy Renewals
Like every other business, insurance companies exist to earn profit. If you are in a red zone or a geographically adverse region, you will find it hard to get a home insurance policy due to a lack of companies willing to assume that much risk.
However, if you could buy a home insurance policy from a new insurance company, which is at its growth stage, it will be tough in the future to get your insurance policy renewed.
It will happen because:
- The insurance company will shut its doors and cease to operate in your region. It can happen due to the company becoming bankrupt because of paying claims.
- The company accommodated you in its initial years, as it was eyeing growth, and wanted to expand its reach & its customer network. When it accomplishes its goals, it stops renewing its high-risk insurance policy as it is now focusing on profitability.
Thus, the observation is that the residents of a region that is more prone to disasters often find it tough to get an insurance policy in the first place, and even if they manage to do so, they find it hard to get a renewal.
3. Lack of Coverage
The region in which you live might be facing earthquakes so often – So you got yourself a general home insurance policy with an additional cover for earthquakes. In another situation, your region might be prone to floods, and you got yourself covered for floods. But is it enough? – Not.
Climate change is changing things for real, altering how everything used to happen. In the present world, nobody can say that Toronto cannot face a flash flood or maybe tropical storms.
Now since there is no possibility of the occurrence of a particular disaster in your region, you might be willing to expand your cover and be keen on adding more disasters, which have a possibility of occurring in your region.
For example, your region is least prone to earthquakes, but owing to climate change, you prefer to get yourself covered for this event too.
Ultimately, this increases your premium and the overall cost of insurance. You will be required to pay more to cover more events. It can increase your total expenditure and push you away from achieving your financial goals.
4. The Flood Cover
The flood insurance coverage was first introduced in 2015 by a few insurers – Aviva, Intact, Pembridge, and Unica. As per a recent statistic, water is the top reason for property damage in Canada.
The flood insurance policy is available to about 90% of Canadians, and around 60% of them have bought it. The reason is simple – what if our region, which does not experience a flood, gets affected due to climate change?
These policies affect the home insurance policies as most people prefer to buy them as an add-on. The insurance companies usually charge a premium between $10 and $30 per month to get compensated.
Wrapping it Up
Climate change is real, and there has been a visible increase in the occurrence of natural disasters in the past few years. It laid an adverse impact on home insurance policies as now more and more people are willing to gain coverage for uncovered events, such as earthquakes, floods, etc.
It put pressure on the premiums as the consumers are now paying more for additional coverage.
Moreover, the severity of the disaster and the quantum of loss are also going north, which has further prompted the homeowners to boost their sum assured limits also.
