Home buyers typically consider things like prices and mortgage rates when making purchasing decisions, but often overlook the cost of insurance premiums — which are soaring in parts of the country’s struggling condo markets.
A new report from LowestRates.ca looked at Ontario, B.C, and Alberta. It found insurance premiums for condos were up 3 per cent in Ontario in the third quarter compared to the same period last year.
But the situation is more dire in Alberta and Vancouver, where condo owners are paying premiums 16 per cent higher than last year, in large part because of skyrocketing deductibles. That’s bad news for people living in their units and for investors already fighting the forces of lower rents because of a COVID-19 induced urban exodus.
The report’s authors also point to the increased cost of building materials, higher frequency of damaging weather events, and a lower number of insurance carriers competing for condo insurance business in those provinces.
According to the report Ontario could find itself in a similar situation down the road.
“Some cities, such as Toronto, have rushed to build condos to keep up with a rapidly increasing population,” read the report
“Condos being built so quickly increases the risk of lower workmanship, potentially resulting in building problems that may require an insurance claim later on. This could contribute to the trend of a rising number of claims.”
Premiums for all home types is up 6 per cent in B.C., up 1 per cent in Alberta, and down 1 per cent in Ontario.
If home prices continue to climb, insurance premiums will too, because of higher replacement costs.
But if climate change isn’t brought under control, higher premiums are unavoidable.
“For example, flash flooding and hail have been major events in recent years which resulted in significant costs to the industry,” said Elektra Hilton, director of operations at DirectRate.ca
“Home insurance rates will likely continue to be impacted by severe weather events.”
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.