6 things that will help you counter the impact of inflation on your insurance
Did you know? Canada’s annual consumer price inflation rose to 7.7% in May of 2022 – the fastest pace in 39 years and higher than experts predicted, according to Statistics Canada. The main reasons for the spike – driven by Western sanctions in response to Russian attacks on Ukraine which continued to lift the prices of energy and commodities, came from:
- Transportation – fueled by gas prices surging nearly 50%.
- Food price pressures – with grocery prices rising nearly 10% – Canadians report being the most affected by rising food prices.
- Shelter – up a rapid 7.4% as mortgage interest rates continue to rise.
- Services prices – As whole rose 5.2% as Canadians started travelling again putting upward pressure on traveler accommodation (up 40.2%).
What this means for you?
A generation of Canadians is experiencing high inflation for the first time. If you aren’t over 40, you have never lived through inflation like this, and unfortunately, inflation is expected to remain elevated through 2022, say economists at TD Bank. On the shelter side, Canadians are likely to see a continuation of rent price increases alongside rising mortgage interest costs.
1. Rising rent & mortgage interest - On the shelter side, Canadians can expect continued rent price increases and rising mortgage interest costs. This will be balanced against the impact of declining house prices. 2. Costlier home renos/rebuilding of damaged properties - More Canadians than ever are doing home renovation projects since the pandemic started and more people work from home. Increased severe weather events due to climate change is also adding to the demand for rebuilding/repairing damaged properties. In addition, prolonged pandemic-induced supply chain issues and labour shortages, and surging costs of building materials continue to impact construction costs – meaning it’s costlier than ever and will take longer than before to have your home reno done or to rebuild or replace buildings. 3. More expensive vehicle repairs/replacement - Thanks to rising costs for used vehicles (up 25% over the past year) and new cars (up 6%), and higher parts prices, as well as broader supply chain issues and a computer chip shortage, vehicle repairs and replacement costs are higher too, reports Aon. 4. Rising insurance rates – To keep up with rising inflation, a hard market cycle, insurance companies will continue to adjust home, auto and business insurance premiums. However, there are signs relief is in sight.
6 things you can do to overcome these challenges:
1. Review your property values - Hire a professional replacement cost appraiser/contractor to evaluate your property assets. 2. Talk to your broker - Your broker will guide you through the appraisal process, explain coverage limits in detail and help identify coverage gaps to make sure your insurance to value rates are valid. 3. Update our policy - Your broker can help get your policy updated to ensure your personal home or commercial properties are insured to value. 4. Improve your risk profile – Remain a low-risk customer for your insurance company by minimizing and managing your exposures. 5. Invest in risk management – Try to avoid a claim in the first place by ensuring you implement risk management practices and regularly maintaining your home, car and other assets. 6. Stay on top of your policy renewal – Don’t wait until it’s time to renew your policy to relook your insurance needs. Talk to your broker a few months in advance for expert advice on your upcoming renewal.