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 true 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 homeowners in Quebec face today.
What Is Underinsurance and Why Is It Dangerous?
Underinsurance occurs when the replacement value stated in your policy is lower than the actual cost of rebuilding your home to the same standard 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 comes out of your pocket.
But the consequences of underinsurance aren't limited to 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 payout may be reduced proportionally even for partial claims. This means that even for a minor loss, you might not be compensated to the extent you expected.
How Much Have Construction Costs Risen in Quebec?
Between 2020 and 2025, average residential construction costs in Quebec increased very significantly, with estimated hikes of 30% to 50% depending on the region and type of construction. These increases are attributable to several factors:
- A sharp rise in the price of construction materials, notably lumber, concrete, and steel.
- A shortage of skilled tradespeople in the construction sector, which has driven up wages.
- Generalized inflation affecting the entire supply chain.
- Extended supply delays that caused cost overruns for contractors.
A home your insurer valued at $300,000 replacement cost in 2019 could easily be worth $420,000 to $450,000 today. If your coverage limit hasn't been adjusted accordingly, you are underinsured.
How to Check Whether Your Home Insurance Is Sufficient
Step 1: Find Your Current Coverage Limit
Review your insurance policy and look for the amount listed 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 the market value of your home — it's the cost to rebuild it identically, including the foundation, structure, roof, plumbing, electrical systems, and interior finishes. A broker or real estate appraiser can help you obtain a realistic estimate.
Step 3: Compare and Adjust
If the estimated rebuilding cost exceeds your current coverage limit, contact your broker to increase your coverage. This step is simple, quick, and generally inexpensive compared to the risk it eliminates.
What Some Policies Offer to Protect You Against Underinsurance
Some insurers offer additional protections to mitigate the risk of underinsurance:
- Guaranteed replacement cost coverage: The insurer commits to paying the actual cost of rebuilding, even if it exceeds the limit stated in the policy (often up to a certain percentage above).
- Automatic indexation: The coverage limit is adjusted annually based on a construction cost index, reducing the risk of falling out of step with market reality.
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 construction costs in your area have risen notably
Conclusion
In a context where construction costs have risen dramatically in Quebec, many homeowners are underinsured without knowing it. Taking the time to verify your coverage and adjust it if necessary is one of the most important decisions you can make to protect your asset. LMBF Insurance brokers can review your current coverage and recommend the adjustments needed to ensure you are fully protected.
