As water levels and average temperatures rise, so do concerns over insurance coverage for Greater Victoria homeowners amid a larger problem in the province – climate change-fuelled disasters.
In May 2022, 34-year-old Mica Munro and 32-year-old Jasper Smith bought a $1-million house in Saanich and purchased home insurance that included earthquake coverage.
“We decided to go in with all the bells and whistles,” Munro told Black Press Media.
The following year, the pair decided to opt-out of paying for earthquake insurance, which almost cut their home insurance expenses in half. Although Munro and Smith were able to save a chunk of change, that hasn’t stopped them and homeowners alike from worrying about the impacts climate change might have on their house.
“That probably put us at a bit of an anomaly for a lot of people, especially because most people are pretty risk-averse and considering we’re on a fault line, but we just decided to roll the dice,” said Munro.
A survey from RatesDotCa released on June 29, 2023 found that 35 per cent of Canadian homeowners considered the potential risks of climate-induced weather patterns when buying a home. That consideration rose to 64 per cent among homeowners between ages 18 and 34 years old.
In 2023, natural disasters and severe weather caused more than $3 billion in insured damages in Canada for the second year in a row. The Insurance Bureau of Canada’s annual tally places last year as fourth on the bureau’s list of the most expensive weather years - a list that is still topped by the Fort McMurray wildfire in 2016.
Wildfires are an expensive force to be reckoned with, insurance data shows. The Okanagan and Shuswap fires last August and September cost $720 million, making them the most expensive insured event ever recorded in the province.
While Vancouver Island doesn’t have the Okanagan’s hot and dry climate, it still had its fair share of wildfires last summer. The Muir Creek wildfire north of Shirley grew out-of-control, according to the B.C. Wildfire Service. Closer to home, a fire broke out on the Malahat during a multi-day record-breaking hot streak.
READ MORE: B.C. wildfires burn big chunk of more than $3B in 2023 insurance claims
READ MORE: B.C. insurance industry faces wildfire property damage toll
READ MORE: Malahat brush fire ignites on 3rd day of record-breaking heat
Buying climate disaster insurance is recommended
Climate change isn’t a direct cause of earthquakes but can still trigger “slow earthquakes,” according to NASA. Major storms including hurricanes can also create atmospheric pressure and spark a quake.
Like many, Munro and Smith are weighing out the risks and costs.
“It definitely plays a part in making decisions for our home insurance recognizing home insurance companies will also be taking that into account with the way that they charge rates,” Munro said.
Matt Marcoux, a master’s student at the University of Victoria, is studying the impacts of climate change on home insurance.
Marcoux, who has a background working in insurance, found that a deductible for earthquake insurance is usually around 10 per cent of the cost of a home. In Greater Victoria, this translates into about a $100,000 of the $1-million benchmark. Munro and Smith’s deductible was $75,000 when they had earthquake insurance. That year the pair paid $3,100 for insurance but after opting out of earthquake insurance the following year, the couple only paid $1,600.
Although earthquake insurance in Greater Victoria is costly, Marcoux said “it’s still 100 per cent a good idea to buy earthquake insurance,” going so far to suggest that its the more-expensive coverage people should consider buying.
”The type of insurance that people should buy is for losses that they cannot recover from,” said Marcoux. “Brokers may try to up-sell things like jewelry coverage on a wedding ring, and although that’s inexpensive, I would say that kind of insurance is of very little value. So, the price of insurance coverage is directly proportional to the risk of that coverage.”
Stephanie Lumley is thankful she had insurance after a 120-foot tree crashed down through the roof of her Sooke home during a wild windstorm in January. Lumley said she got lucky because the tree didn’t hit any structural beams, but the estimated cost of the repairs was $25,000 and could still increase.
“Every year you hear about people’s houses either going up in smoke or getting damaged, and they didn’t have insurance,” Lumley said. “I just want to make an example for the community that if we hadn’t got insurance and got the bill in right now, the cost would keep going up and that would wipe us out.”
As the homeowner is close to the ocean, she’s worried about the impact weather events could continue to have on her home.
“There seems to be more and more damage with the storms and of course climate change.”
READ MORE: Surviving the Storm: Winter weather wreaks havoc on Sooke woman’s home
Good news for insurers and homeowners
Insurance companies now have reinsurance so they don’t go bankrupt after having to pay out large natural disaster premiums.
Marcoux explained that the 1994 Northridge Earthquake on the San Andreas Fault was a “big wake-up call to the industry.” The event marked the most expensive premium payout by insurance companies for earthquake damage.
International insurance companies providing reinsurance to local insurers are banking on only one area around the world having a natural disaster at a time.
“As long as a large earthquake happens on the west coast and not across the world at the same time, these companies aren’t going to go bankrupt,” said Marcoux.
Subscription policies also help local companies provide insurance for large weather events. Marcoux explained that on an insurance contract, there will be an insurance company as a lead insurer, but a multitude of other insurers will take up a portion of the risk.
While there is good news for the financial security of insurance companies, homeowners can also rejoice as Marcoux reported they can expect more money in their pockets. Marcoux said homeowners can suspect insurance rates to see a drop because the industry is currently shifting from a market where coverage is expensive and hard to find, to one that’s cheaper and readily available.
-With files from the Canadian Press
READ MORE:Shuswap resort owner loses home to fire
