In 1752, Benjamin Franklin established the first property insurance company in America.¹ His Philadelphia Contributionship for the Insurance of Houses from Loss of Fire, as the name suggests, only covered the cost of rebuilding homes destroyed by fire. Damage from other causes and/or replacement of contents remained the responsibility of the homeowner.

Over the years, the insurance industry has evolved to offer a broader range of coverage for homes, valuables, conveyances, liabilities and risks that Benjamin Franklin could hardly have envisioned. As these policies grew more robust, it became safe to assume that your insurance would cover the replacement of your home and everything in it, minus deductibles.

However, that assumption no longer holds, particularly for owners of high-value properties in areas prone to wildfire and catastrophic weather events. Increasing losses have led to sharp premium increases, and even those willing to pay far more are struggling to find insurers willing to take their business. The result: Homeowners policies are shifting from a “one-policy-covers-all” approach to “a la carte” model of coverage.

Data driving homeowners policy decisions

While it’s unlikely that the insurance industry will regress to 18^th century practices, the industry’s current focus on requiring homeowners to implement risk mitigation strategies and acquiring more risk themselves may well become the norm. The challenge for affluent homeowners will be to determine the optimal balance of exposure mitigation and self-insurance they’re willing to absorb should losses occur.

Finding the right mix requires a series of decisions based on the probabilities of different types of losses in your location, the expense and time required to implement mitigation measures, the loss costs of your home’s contents and the risk factors of your lifestyle. In addition, the terms of your mortgage and requirements of your co-op or neighbourhood association may also require you to maintain certain types and levels of coverage.

Factors that homeowners should consider before choosing a policy include:

• Regional considerations. The primary threats for major damage to homes varies greatly by region. Western Canada’s wildfire season totaled more than $945 million in damages, with hundreds of fires scorching land in British Columbia, the Yukon and the Northwest Territories.² Nova Scotia flooding caused by Hurricanes Franklin and Lee cost more than $170 million, the spring ice storm in Ontario and Quebec cost more than $330 million and Ontario’s severe summer storms in 2023 caused $340 million in damages.³ Policyholders at risk of flooding may find that raising limits and reducing deductibles for overland water insurance and taking on more risk in the homeowners policy may be the optimal approach. Those with threats of wildfire in the west may want to consider dropping wind coverage and procuring parametric wildfire coverage.
• Local considerations. Of course, the threats that matter most are those that hit closest to home. Assessing those threats requires granular data on the losses experienced in your town, or even in your neighbourhood. Your broker can supply this data and help you understand the levels of risk you may be assuming by reducing or eliminating different types of coverages.
• Insure to value. With rising labour and materials costs, your properties may be underinsured. Failing to insure to value can penalize homeowners by triggering a co-insurance clause that will reduce the amount that can be recovered. To make sure that your property is adequately insured in today’s inflationary environment, ask your broker to add a guaranteed replacement cost endorsement to the policy.

Contact a HUB Private Client Risk Advisor to learn more about assessing your property insurance needs.

¹ The Philadelphia Contributionship, accessed April 25, 2024.
² Canadian Underwriter, “NatCats taking their toll on Canadian property lines,” January 8, 2024.
³ Insurance Business Magazine, “Canada’s 2023 severe weather losses fourth costliest on record — IBC,” January 8, 2024.