Flood insurance: you're not covered!
Ah yes, spring is in the air. Birds are starting to chirp and the weather is starting to warm up a little bit. However, along with the warmer weather, creeks and bodies of water are beginning to swell from the melting snow pack. Higher than average snow pack levels and heavy rain increase both the potential risk and severity of flooding.
Flooding is the most common occurring natural hazard in Canada, beating wildfire by a significant margin. Besides the more typical form of flooding via spring runoff, flooding can appear in many other forms including rising lake levels and rising ground water levels that can become higher than the lowest point in your basement potentially causing water to enter through cracks in the foundation, floors and walls.
The Insurance Bureau of Canada posted the results of a study on their website, indicating that approximately 39% of Canadians believe that homeowners insurance covers them from flood damage. I have seen other studies that suggest this number to be as high as 70%.
As a homeowner, if you think you are covered, sadly you are not. The fact remains that you cannot buy insurance anywhere in Canada to protect you from an overland flood. Canada is the only G8 country without flood insurance available to homeowners. Commercial businesses can purchase flood insurance and the rates tend to be extremely affordable. This leads to a situation where a corner store could be covered, but the neighbor’s home next door would not.
An increasing number of studies are emerging that indicate due to climate change, heavy rain and the potential for flooding is going to continue to increase. Right now, who pays when there is a flood? Depending on the circumstances, some coverage may be available from sewer backup or water extension coverage on your homeowners policy, but only if this coverage has been purchased and only to the limits indicated. That means taxpayers foot the majority of the bill.
Compounding the problem, government flood maps are out of date and need to be updated to a level of quality that would allow the insurance companies to properly underwrite flood prone areas. The flood maps must also take into account climate change.
Under a national flood insurance plan, governments would still participate coupled with reinsurance to assist the insurance companies. This reinsurance program will help to spread out the risk. It will also help to maintain the financial solvency of the insurance companies in the event of widespread flooding, while reducing the cost to taxpayers. Coverage should be affordable and sold widely to spread the risk as well.
By providing flood coverage in partnership with government, Canadian insurance companies would be in a position to help those who end up with flood damage. This will greatly aid homeowners in their levels of security, certainty and peace of mind as the issues revolving around climate change and the risk of flooding increases. And taxpayers would get some relief too. It’s an idea whose time has come.
*This column is intended for entertainment/informative purposes only and is not intended to act as a substitute for seeking the advice of a licensed Insurance Broker or other qualified professional. Coverage is subject to the policy terms, conditions and exclusions – please refer to policy documents– specific circumstances may alter the availability of coverage.
Read more Kris' Insurance Corner articles
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- Flood insurance: you're not covered! Apr 4
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- High value homeowners' insurance Jan 26
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