How tariffs could raise home and auto rates

If there is a prolonged trade war between the U.S. and Canada, expect insurance rates to have something in common with produce, consumers goods, and steel and aluminum: they’ll all raise in price. 

The industry notes there’s a lot of uncertainty about tariffs right now. That in itself is causing headaches for insurance industry execs trying to plan how they will deal with supply chain disruptions. But one outcome the industry can likely count on is increases to home and auto rates, says Steven Harris, licensed insurance broker and LowestRates.ca expert. 

Earlier this month, President Trump implemented sweeping 25% tariffs on all goods imported from Canada and Mexico, with a lesser 10% tariff on Canadian energy products, after which Canada imposed counter tariffs. After stock market volatility, Trump quickly amended his order, saying tariffs would not apply to goods covered under the USMCA trade agreement.

He’s since imposed a 30% tariff on Canadian steel and aluminum. And he’s promising to move ahead with counter-tariffs on Apr. 2.

For auto insurance, expect premium increases to filter in slowly, sources tell CU.  

Personal auto premiums increased an average of 11.3% in 2024 Q4 iver the same time last year. And auto rates increased 3.9% since the previous quarter, per Applied’s Rating Index from 2024 Q4.

Which means factors outside of tariffs are already contributing to a rate increases. For example, labour shortages, the higher prices and complexity of new-model cars, rate caps, and auto theft all play a part in auto’s hard market right now. 

Add Trump’s tariffs on raw materials like steel and aluminum, and that could increase repairable claims costs by 1% to 2% for Canadian carriers, Ryan Mandell, director of claims performance at Mitchell, an Enlyte Company previously told Canadian Underwriter.  

When the price of repair parts increases, and cars are more expensive to repair, those costs could filter down to the consumer. Consumers should expect to see these increases reflected in their premiums when their policies come up for renewal, says Harris in a LowestRates.ca blog post.

One potential reprieve for consumers is an endorsement they may add to their policies, says Harris. 

“With potential tariffs driving up the cost of new vehicles, that Limited Waiver of Depreciation on your auto policy could be a lifesaver. If your car is damaged or stolen, you’ll get the original purchase price back, not a depreciated amount,” he says. “That’s a huge buffer against rising replacement costs in a volatile market.”    

Home insurance rates, on the other hand, might see a more immediate increase to premiums. 

Although home insurance premiums haven’t increased as high as auto rates — in 2024 Q4, for example, personal property premium rates increased 7.3% from the previous year — consumers are likely to see any impacts from the tariffs appear on their home insurance policy renewal much sooner, says Harris. 

And if building materials like software lumber are tariffed, and thereby more expensive to import, they’ll cost more to insure. 

“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.”

Contents coverage might also need to be adjusted on homeowners’ policies.

“Tariffs on building materials directly inflate rebuilding expenses, potentially triggering premium increases and necessitating higher replacement cost coverage for homeowners to adequately protect their assets,” LowestRates.ca writes. “Canadian policyholders are likely to observe these changes at the time of their policy renewal, underscoring the importance of maintaining adequate replacement cost coverage.” 

If there’s one coverage homeowners should consider, it’s Guaranteed Replacement Cost, says Harris. “[Because] tariffs are driving up material costs, guaranteed replacement cost on your home insurance is also important. It ensures your home is rebuilt to its original value, even if tariffs and inflation send material costs skyrocketing…”

Feature image by iStock.com/Elif Bayraktar