Why tariffs will make your home and auto insurance more expensive

With across-the-board tariffs on all imported goods into the U.S (and reciprocal tariffs on American goods enter Canada) underway, many Canadian consumers are left in a fog of uncertainty.  

On the consumer level, tariffs add inflationary pressures on the cost of household goods, which make previously affordable items much more expensive.  

On the economic front,  businesses that rely on a U.S. customer base may see major job losses, particularly in sectors like lumber, steel and aluminum and agriculture.  

If they continue into the long-term, they may increase the cost and slow the pace of homebuilding during our already prolonged housing crisis.  

They also pose a unique risk to the home and auto insurance industry, which considers the cost of raw materials and specialized parts to set rates for customers. And as the cost of goods goes up, so do insurance premiums.  

As of writing, the manufacturing sector and all goods U.S.-Mexico-Canada trade agreement have been given a tariff break until  April 2. However, the uncertainty over the price of cars and cost of insurance continues to loom.  

However, just when -- and by how much -- customers could start seeing these premium increases depends on how long the tariffs continue.  

Impacts to auto insurance premiums will likely come slowly 

The automotive sector is likely to take the biggest hit in a prolonged trade war. Canada and the U.S. share a particularly close trade relationship in car manufacturing, with parts often crossing back and forth between the two neighbouring countries several times before a car is even completed.  

In an interview with CTV News, Flavio Volpe, the president of the Automotive Parts Manufacturers’ Association of Canada,that the automotive sector could shut down within a week of tariffs going through.  

Even without tariffs, auto insurance rates have been surging in the past few years. Due to post-pandemic supply chain disruptions, rampant auto theft, and the higher parts and labour costs associated with our more sophisticated vehicles, insurance premiums increased just over 12% between Q4 2023 and 2024. Any sustained price increases auto parts are likely to push premiums even higher.  

In a statement to LowestRates.ca, the Insurance Bureau of Canada (IBC) writes, “At a time when people are already feeling stretched financially, tariffs will in many cases increase claims costs and could have a corresponding adverse impact on insurance affordability.” 

However, you might not see a big hit on your next renewal. Because auto insurance rates are regulated provincially, insurers in private markets have to apply to their local regulator and request a rate change, which typically happens after claims outpace their operating expenses.  

“Auto insurance is regulated in Ontario through the Financial Services Regulatory Authority (FSRA) and other regulatory bodies in different provinces, and as a result of that it takes time to push right through,” says Steven Harris, insurance broker and expert at LowestRates.ca. “But what we don’t know is whether FSRA would allow a one-time filing to increase rates by 4% or whatever the appropriate number is. That we don’t know.”  

Related: What to do if your insurance provider suddenly increases your rate? 

Check your policy for Limited Waiver of Depreciation:  

If you bought your car new in the past few years, it’s worth checking your car insurance policy to see if you have Endorsement 43, known as Limited Waiver of Depreciation.  

This optional add-on makes sure that if your car is stolen, or totaled and written off, the payout from your insurer will match the amount you initially bought for – and not the depreciated amount, which can eat up 20% to 30% of the car’s value within its first year.  

Depending on the outcome of the threatened tariffs on auto manufacturing, the cost of an equivalent replacement could be much more expensive, but a waiver of depreciation will give you a big boost towards your next purchase.  

Related: What does ‘total loss’ mean for your car insurance? 

Home insurance could soar in the face of tariffs 

Unlike the auto insurance sector, home insurance is not regulated. Because of that, consumers are likely to see any impacts from the tariffs appear on their home insurance policy renewal much sooner, says Harris.  

If prices on materials were to see a rapid increase, home insurance rates would adjust as needed. 

“If [home insurers] wanted to, they could raise prices tomorrow and there's no barriers to doing that,” he adds. What’s more, sweeping tariffs could impact every type of home insurance coverage, especially replacement cost.  

Replacement cost tends to be the single biggest portion of any given home insurance policy. It’s determined by price of the raw building materials, the home’s overall risk of damage and associated repair costs.  

“Lumber, flooring materials, aluminum, steel, ceramic tile, carpets and textiles -- All that gets integrated into that rebuild cost of that building,” says Harris. “With tariffs imposed, it is just more expensive now to rebuild or repair homes. There's going to be a direct impact.” 

Another crucial piece of home insurance that will likely see an increase is contents coverage, which covers the cost of your personal belongings in your home -- from furniture and appliances to everyday items like clothing and cookware.  

The more expensive they are to import, the more they’ll cost to insure.  

“The expectation is those prices are going to go up — the cost to repair, the cost of replacement of goods. For any covered peril; fire, theft, water, it’s all going to be impacted,” says Harris.  

Again, the exact increase to your home insurance cost and when you get it will depend on just how long this trade war lasts. The sooner the tariffs come to an end, the less you can expect a big increase on your next renewal.  

Read more: Three home insurance endorsements to consider based on where you live 

Guaranteed Replacement Cost can carry you through a rollercoaster economy 

This coverage directly relates to the physical structure of your home, including your home, attached garage, and any built-in appliances.  

If your home is destroyed by fire, tornado, or any other covered peril, the Guaranteed Replacement Cost will make sure your home is rebuilt at the original estimate offered by your insurer, even if inflation or tariffs have pushed up the costs of material and labour.  

So, say your insurer estimated that the cost to replace your home to be $800,000, but after reassessing the impact of tariffs a few months in, it ends up working out to $950,000. If your home is destroyed in a fire, the Guaranteed Replacement Cost ensures that your home will still be replaced.  

The good news is that most home insurance policies already have Guaranteed Replacement Cost, since it’s one thing that mortgage lenders will require of borrowers.  

Compare rates to get the lowest price – no matter what happens 

Since nobody knows just which other goods could be subject to higher tariffs and how long the tariffs could be in effect for, it’s still uncertain what the increases to home insurance could be. What is certain, however, is that increases do happen, due to any number of factors including climate change risk, theft, and more.  

The best way to ensure you’re paying the best price for the right coverage is to compare home and auto insurance rates annually.  

“The market changes so frequently and insurance companies are constantly changing to optimize their pricing to return a reasonable profit is one reason customers should shop around,” says Harris. “There are too many variables that go into it. You can’t predict that your price is going to be stable year over year.”