Flood Insurance in Canada

About flood insurance in Canada

Flood insurance can be a nebulous term in the home insurance industry, depending on who you ask. If you think that it’s protection against all kinds of water damage – whether it’s coming from a leaky pipe, an overflowing river or a backed-up toilet – you’d be wrong.

The truth is, all-in-one flood insurance doesn’t exist in Canada. Instead, what you get is three types of water damage protection (two of which are often excluded from standard policies):

• Water damage: Protection from water sources located on your property (inside and outside), such as indoor plumbing, air conditioning, heating, sprinklers and other fixtures or appliances. This coverage is included in most standard home insurance policies.
• Overland water or inland flood: This coverage is optional. It protects your home from floods produced by external sources like ponds, rivers, streams, lakes and other bodies of water that overflow onto dry land. It also protects your home from floods caused by heavy rains or melting snow (for instance, when rainwater seeps into your basement).
• Sewer back-up: This protects your home from water coming from backed-up toilets, water drains and sewage systems. Basically, if sewer water is involved, this coverage will have your back. It is optional and often paired with overland water.

When buying a home insurance policy, make sure you’re clear on what you’re paying for. ‘Water damage’ may sound like comprehensive flood protection, but it isn’t. If anything seems unclear, consult with your insurer to gain clarity. Their nomenclature may differ from what’s listed here, but the overall protections should be the same.

It’s also worth noting that most Canadian insurers do not offer protection against coastal flooding (also known as ‘storm surges’) – caused by abnormally high sea water levels. This isn’t to say that Canadian homes are not at risk of coastal flooding, however. In fact, according to a recent study, more than 3.9 million Canadians live in areas that might be impacted by coastal flooding by the end of the century. If you think your home is at risk, learn more about coast flooding from the Government of Canada.

What are the different kinds of water damage covered by my standard home insurance policy?

Here are the types of water damage that your standard home insurance policy should cover:

• Appliance or fixture malfunctions. Like a washing machine, dishwasher or a toilet overflow (if caused by sewer backup) on your property. The repairs to the appliances and the damage would be covered if it was sudden or accidental.
• Burst pipes. Flooding due to a faulty sprinkler/indoor plumbing, air conditioning/heating system ruptures or a broken water main are all typically covered, as long as the damage is not a result of poor maintenance (e.g., frozen pipes).
• Roof leaks. Leaks on the roof due to causes other than wear and tear will be covered. If your roof is over 10 years old, you may not receive coverage. It is always wise to consult with your insurance provider to better understand the specifics.
• Ice damming. This is a ridge of ice that forms at the edge of a roof and prevents melting snow and ice from draining off. This type of water damage is covered under most basic home insurance policies.

What are the types of water damage covered via home insurance add-ons?

What you won’t find on most standard home insurance policies is coverage for damage coming from water sources outside your home. This is one of the biggest sources of confusion for many home insurance policyholders. When people think of ‘water damage,’ they instantly imagine a standard flood (e.g., coming from an overflowing river), but that’s not actually the case.

That said, if you do want to protect your home from other sources of water, you can do that – by purchasing these add-ons:

• Sewer back-up: This coverage protects homeowners in the event their home gets flooded due to a backed-up main sewage line. The sewage water starts flowing in a reverse direction and can potentially enter your home through your toilet or a drain. The blockage can be caused by all manner of things, including broken pipes, excessive rainwater, melting snow or even tree roots. 
  
  A backwater valve can prevent flood occurring because of sewer back-ups, so if you don’t want to pay for this coverage, you can install such a valve in your home.
• Overland water: When people say ‘flood insurance,’ what they often mean is ‘overland water coverage.’ If your home gets flooded because of a lake, river, stream or pond overflowing onto dry land or excessive rainwater or thawing snow, this coverage will pay for repairing the damage. Basements in particular are highly susceptible to this type of flood. So, if you have a basement, we recommend buying this coverage. 
  
  It’s worth noting that you can only purchase this coverage if you don’t live in an area where overland flooding happens often (making it too high-risk to cover). Talk to your insurer to find out if this is the case.

What types of water damage are not covered by home insurance?

Certain kinds of water damage won’t get covered at all. Usually, when water damage is gradual, it won’t get covered. The reason for this is that gradual water damage is largely preventable and is therefore classified under ‘maintenance’ – which falls on the policyholder’s shoulders, not the insurer.

Here are some examples of water damage that’s unlikely to get covered by your insurer:

• Sump pump failure: If your sump pump doesn’t function properly due to poor maintenance, causing a flood, you won’t get covered. That said, sewer back-up coverage (which is an add-on) could cover if the sump pump failure is unexpected or sudden.
• Dripping ceiling: If you have a dripping ceiling, especially due to an old roof that hasn’t been repaired in years, you will not get coverage. This is especially true if you allow the leak to persist for a long time.
• Plumbing problems: If you have a clogged sink or toilet, which one day overflows and floods your home, you won’t get coverage. Making sure all the drains work properly is your responsibility as a homeowner.
• Frozen pipes: If your home is not properly heated in winter or your pipes are not properly insulated, they may burst and cause a flood. Given that this is preventable, insurance won’t cover the damage.
• Tidal flooding: If you live on a coastline, damage caused by rising sea levels will not get covered by most insurers in Canada. This includes tsunamis and tidal waves.

Note: If your home is vacant – meaning it remains unoccupied for more than 30 days – a water leak can occur while you’re away. Even if the leak is sudden, it may not be covered due to too much time passing between the leak occurring and you submitting the claim. It’s worth getting vacant home insurance in this scenario.

In general, the more time passes between claim submission and occurrence of water damage, the less likely the claim is to be accepted. So, be sure to contact your insurer as soon as the damage occurs. Don’t wait.

Government assistance for homeowners without adequate flood insurance

If you are unable to obtain sufficient overland water coverage due to living in a high-risk area, you can look to your local government for protection.

Ontario has a Disaster Recovery Assistance for Ontarians (DRAO) program, which can help you recover costs following a natural disaster (such as an overland flood). It’s applicable if the damage is sudden or unexpected.

If eligible, DRAO can reimburse you for:

• Clean-up costs
• Repair or replacement costs (for essential property)
• Emergency expenses like evacuation travel costs

Additional details

• Coverage limit is $250,000 per application.
• Coverage is subject to a $500 deductible (though low-income households may be exempt).
• Coverage reimburses up to 90% of total eligible costs, with limits on emergency expenses, household appliance and furnishings.

Consult the Government of Canada for more information on disaster assistance in other provinces.