Would Rebuilding Your Home Cost More Than You Think?
In Quebec, residential construction costs have risen dramatically in recent years. Labour, materials, lumber, steel, and subcontracting services have all increased significantly. If your home insurance policy hasn't been reviewed recently, there's a good chance the coverage amount in your contract no longer reflects the actual cost of rebuilding your property in the event of a total loss.
This phenomenon, known as underinsurance, is one of the most common — and most costly — problems facing homeowners in Quebec today.
What Is Underinsurance and Why Is It Dangerous?
Underinsurance occurs when the replacement value listed in your policy is lower than the actual cost to rebuild your home identically at the time of a claim. In the event of a total loss — a devastating fire, for example — you will receive only the insured amount, not the actual rebuilding cost. The difference is your responsibility.
But the consequences of underinsurance extend beyond total losses. Many home insurance policies include a co-insurance clause: if your coverage represents less than 80% to 100% of the actual replacement value, your compensation — even for partial claims — may be reduced proportionally. This means that even for a minor claim, you may not be compensated to the extent you expect.
How Much Have Construction Costs Risen in Quebec?
Between 2020 and 2025, the average cost of residential construction in Quebec increased dramatically, with estimates ranging from 30% to 50% depending on the region and type of construction. These increases are attributable to several factors:
- Sharp increases in the price of construction materials, particularly lumber, concrete, and steel.
- A shortage of skilled tradespeople in the construction industry, which drove up wages.
- Broad inflation affecting the entire supply chain.
- Extended supply delays that created cost overruns for contractors.
A home your insurer estimated at $300,000 replacement value in 2019 could easily be worth $420,000 to $450,000 today. If your insurance limit hasn't been adjusted accordingly, you are underinsured.
How to Check Whether Your Home Insurance Is Adequate
Step 1: Find your current coverage limit
Review your insurance policy and locate the amount indicated for building coverage. This is the maximum amount your insurer will pay to rebuild your home in the event of a total loss.
Step 2: Estimate the current rebuilding cost
The rebuilding cost is not your home's market value — it's the cost to reconstruct it identically, including foundations, structure, roof, plumbing, electrical, and interior finishes. A broker or property appraiser can help you obtain a realistic estimate.
Step 3: Compare and adjust
If the estimated rebuilding cost exceeds your current insurance limit, contact your broker to increase your coverage. This process is simple, quick, and generally inexpensive compared to the risk it eliminates.
What Some Policies Offer to Protect Against Underinsurance
Some insurers offer additional protections to reduce the risk of underinsurance:
- Guaranteed replacement cost coverage: The insurer agrees to pay the actual rebuilding cost, even if it exceeds the limit stated in the policy (often up to a certain percentage above).
- Automatic indexing: The coverage limit is adjusted annually according to a construction cost index, reducing the risk of falling behind the market.
Check whether these options are included in your current policy or available as endorsements.
When Should You Reassess Your Coverage?
- At each annual renewal
- After major renovations (kitchen, bathroom, room addition)
- If you haven't reviewed your policy in more than two years
- When there is a notable increase in construction costs in your area
Conclusion
In a context where construction costs have risen dramatically in Quebec, many homeowners are unknowingly underinsured. Taking the time to review your coverage and adjust it if necessary is one of the most important decisions you can make to protect your assets. The brokers at LMBF can assess your current coverage and recommend the adjustments needed to ensure you are fully protected.
