Why does my dwelling limit increase every year?
The dwelling limit tracks what rebuilding would cost, and building materials and labour cost more each year. Insurers index the figure at renewal so the limit keeps pace. Sutherland Insurance, a Guelph brokerage founded in 1870, reviews limits at renewal for clients across Ontario.
Part of the Sutherland Insurance guide to home insurance in Ontario.
The short answer
It is not a price increase in itself. The limit rises because the cost of the work it is meant to pay for has risen, and a limit frozen at an old figure would leave a shortfall at claim time.
What drives the increase?
Construction cost inflation: lumber, steel, roofing, drywall, and the labour to install them. Insurers apply an index at renewal reflecting those movements, and a policy with guaranteed or extended replacement cost depends on the limit being kept current.
Renovations move it too. Adding a bathroom, finishing a basement or replacing a kitchen changes what rebuilding would cost, and the insurer only knows if it is told.
The premium usually moves with the limit, because the amount at risk has changed. That is a different thing from a rate increase applied across a book of business.
What does this mean at renewal in Ontario?
The renewal is the point to check that the limit still reflects the house as it stands, including any work done during the year. An unreported renovation leaves the limit measuring a house that no longer exists.
Where a limit looks wrong in either direction, a broker can ask the insurer to recalculate it.
Sutherland Insurance reviews every client's renewal before they decide.
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