Qubit Insurance, a Montreal-area brokerage, said a review of 1,200 new client policies found 38% were underinsured relative to current rebuilding costs, by an average of 16%.
The brokerage argues this exposes homeowners to co-insurance clause penalties that can reduce claim payouts even on partial losses, and points to rising construction costs as the underlying driver.
"We're seeing this constantly in client feedback right now: people who haven't touched their property coverage limits in years, even though the actual cost to rebuild their home has increased substantially," said Manjot Singh, an insurance broker at Qubit. "The frustrating part is that it's invisible until there's a claim; nobody gets a warning that their coverage has fallen behind."
Qubit doesn't disclose whether the 1,200 policies reviewed were randomly sampled, drawn from a specific demographic or region, or self-selected in some way that could skew the result.
Underinsurance isn't a claim unique to Qubit.
Carrie Bernardo, vice president of private client practice at Boardwalk Insurance, a division of Oracle RMS, has described it in blunt terms: "Underinsurance is a regular, everyday occurrence we are dealing with across the industry."
Industry reporting has documented real cases illustrating the exact mechanism Qubit describes: one Canadian home insured for $1.2 million was damaged by fire, only for the actual rebuild cost to come in closer to $1.9 million, a gap the policyholder was fortunate enough to have covered through a guaranteed replacement cost endorsement rather than a standard limit.
Bernardo has noted the exposure is particularly pronounced in the high-net-worth market, where custom finishes and imported materials can push rebuild costs well beyond what standard valuations assume, and that clients often push back on valuation increases or seek lower limits even when rebuild costs point the other way, an E&O risk for brokers who don't document that conversation clearly.
Insurance Business has previously reported on a related version of this problem specific to seasonal properties, where cottage owners often assume their coverage automatically keeps pace with rebuild costs and can end up underinsured if a capped policy isn't reviewed every couple of years. That's precisely the renewal-time review gap Qubit's release is describing for primary residences.
Co-insurance clauses are a standard feature in many Canadian home insurance policies, typically requiring a dwelling to be insured to at least 80% of its replacement cost.
If a homeowner falls below that threshold, insurers can apply a co-insurance penalty that reduces a claim payout proportionally, even for a partial loss well below the full coverage limit.
Quebec's own construction cost inflation is independently documented too: the Association des professionnels de la construction et de l'habitation du Québec has published its own residential building construction price index showing a 37.3% increase across Quebec between the first quarter of 2020 and the third quarter of 2023, an even larger increase than the 18% figure cited in Qubit's release, though covering a different, earlier period.
The practical recommendations in Qubit's release are sound, standard advice independent of how the underlying statistics hold up.
Reassessing a home's reconstruction cost every two years or after major renovations, reviewing dwelling coverage limits at every renewal rather than allowing automatic rollover, confirming directly with an insurer whether a co-insurance clause applies and at what percentage, and comparing reconstruction-cost estimates across multiple carriers.
As Bernardo's comments suggest, documenting those valuation conversations at renewal isn't just good client service, it's a meaningful E&O safeguard for the broker having them.
