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Rising Inflation Could Lead to Underinsurance

Rising Inflation Could Lead to Underinsurance

As of April 2022, the Consumer Price Index has risen 6.8% year-over-year, marking a 31-year high inflationary period in Canada. The costs for building materials and labour have also gone up significantly due to supply constraints – far outpacing the rising rate of inflation. In many provinces, including British Columbia, Alberta, and Ontario, there is mandatory requirement to insure your condominium to full replacement cost. In the event of a total loss, owners could find themselves paying out of pocket for special assessments should there be a shortfall in coverage.


Several other factors must also be considered in the event of a rebuild including, professional fees, taxes, bylaw and building code revisions, and demolition and removal to name a few. All off these combined make up, what insurance appraisers refer to as, Total Insurable Value, or TIV. The Total Insurable Value is the single most important figure in expressing the cost to fully replace a property in the event of a total loss.

Costs of Materials and Labour Outpacing Inflation

With the current volatility of the costs to rebuild, the adequacy of your coverage should be reviewed – at the minimum – on an annual basis. Lumber, for example, has been particularly volatile in the past 6 months, hitting highs of nearly $1,500 per 1000 board feet this past March. It is now sitting at just over $650, at the time of this writing. Last month, residential and non-residential building construction costs went up 22.6% and 12.8% year-over-year respectively – one of the largest annual increases in the last decade.

In an unprecedented high inflationary period, the costs for insurance operations and claims increase more than projected. The insurance industry is “no stranger to dealing with inflationary pressures,” according to Don Forgeron, president and CEO of the Insurance Bureau of Canada (IBC). “In the property and casualty (P&C) insurance sector, inflation is running higher than in the economy write large … Homeowner’s replacement costs are running at 13% higher than pre-COVID.” 

Ensure you are adequately protected

Given the volatility of construction costs, and the record-high inflationary period we are in, it is essential that your condo or strata corporation is adequately insured. We have seen cases where properties have been underinsured, exposing themselves to unnecessary financial risk and liability. Having an insurance appraisal done on an annual basis, by experts trained in local construction costs, will ensure that you not only have sufficient coverage, but that you are paying the right premiums.

Normac provides three-year appraisal programs with complimentary updates. 
Our industry-leading reports are prepared by replacement cost experts.

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