Will Tariffs Increase Insurance Rates in Canada?

What is a tariff?

You’ve likely heard in the news, effective March 13, 2025, the Government of Canada is imposing 25% tariffs on $29.8 billion in products imported from the United States.

But what exactly is a tariff?

Import tariffs are taxes levied by one country on goods from another. While these taxes theoretically only impact the importing country's prices (e.g., US tariffs only affect prices within the US), in reality, they often trigger retaliatory tariffs from affected countries.

For instance, US tariffs have prompted Canada, a major importer of US goods, to impose its own tariffs, resulting in increased prices for Canadian consumers across various sectors, including insurance.

How do tariffs impact the insurance industry?

As the prices of raw materials, components, and labour surge, the expenses associated with mending or substituting damaged items such as cars and houses inevitably climb. This price surge extends to the realm of insurance, where policies designed to protect these physical assets must adjust their premiums to align with the heightened costs of repair and replacement.

In the automotive sector, the rising prices of spare parts, paint, and other essential components translate to more expensive repairs. Similarly, in the housing market, the inflated costs of lumber, concrete, and other construction materials lead to higher replacement costs for damaged or destroyed homes.

These escalating expenses cause providers to raise their premiums to ensure they can adequately cover the increased financial burden of repairing or replacing insured items. The increasing complexity and technological sophistication of modern cars and homes can also increase these costs.

Premiums need to increase to cover rising costs. Otherwise, insurers may be unable to pay claims, leading to financial instability and a loss of confidence in the insurance market.

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Will car insurance rates increase due to tariffs?

Canada’s automotive industry and insurance ecosystem are deeply intertwined with the U.S. market. In 2024, the U.S. exported over $31.2 billion USD worth of passenger cars manufactured in Canada, and $19.5 billion USD of Canadian-made auto parts.

Given this close integration, tariffs on materials like steel and aluminum have far-reaching consequences. Auto parts, for example, often rely on metals like aluminum, which Canada supplies to the U.S. in large quantities.

• Increased vehicle price: The 25% tariff imposed on vehicles manufactured in Canada could lead to a significant increase in manufacturing costs. An expert in manufacturing policy, Greig Mordue, estimates that these tariffs could result in an additional $5 billion in annual costs for automakers like Toyota, which produces over 500,000 cars in Ontario.
• Rising repair costs: Tariffs on steel and aluminum raise the costs of auto parts and vehicles, both exported and imported by Canada. As a result, repair and claims payouts may increase to reflect these higher costs.

Will tariffs increase home insurance policies?

As mentioned above, if the cost to repair or replace physical objects, such as your home and the contents inside increases, you might see an increase on your policy costs and an impact on determining the replacement cost for your home. Here are some examples:

• Steel and aluminum: Canada implemented a 25% tariff on steel and aluminum. Many building materials and tools fall within the scope of tariffs and may lead to increased construction costs. A recent Globe and Mail article shows that building materials account for as much as one-third of property insurance costs.
• Contents: The 25% tariff also applies to miscellaneous goods you might have included in your contents insurance, such as sporting equipment, bicycles, and computer monitors, leading to a higher cost to replace in the event of a claim.
• Extended repair times: Building delays from material procurement issues increase insurance costs and cause frustration and financial strain for displaced homeowners. This is why it’s good to consider reviewing additional living expenses as part of your policy.

Speak to a broker to learn more about tariffs and the potential impact on your policy

Tariffs undeniably introduce a layer of complexity to the insurance landscape, potentially leading to increased premiums for both auto and home insurance. To navigate these changing dynamics and ensure you have the best coverage at a competitive rate, speak with our experienced team of brokers. We can provide you with personalized quotes and insights into how tariffs might specifically impact your insurance needs, allowing you to make informed decisions and protect your property and automobile effectively.