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Will Home Insurance Costs Rise Because of Flooding Risks?

April 28, 2020
5 mins
An older professional woman gazes out the window while taking a break from working on her laptop at home

The flood season is upon us, and it’s already impacting parts of Canada. One wonders if home insurance costs will rise along with the increasing risk to residential properties flooding poses. The answer may be ‘yes’ depending on where you live.

For instance, flooding within the Regional Municipality of Wood Buffalo, Alberta, and other nearby communities is resulting in evacuation orders. Meanwhile, homeowners in other parts of the country are seeing their home insurance premiums double if their houses are located in a high-risk area for floods.

Dealing with a natural disaster or catastrophe like a flood is challenging enough at the best of times. Arguably, the COVID-19 crisis will make things infinitely more difficult when community evacuations are required because of physical distancing measures.

According to the Institute for Catastrophic Loss Reduction, homeowner losses due to natural disasters reached $100 billion in losses globally in 2005. Moreover, the Insurance Institute of Canada notes since the 1980s, property claim payouts because of severe weather damage is doubling every five to 10 years, and this trend is expected to continue. Though flooding is the most significant peril facing Canadians, dealing with it effectively requires up-to-date flood mapping. Unfortunately, most of Canada’s flood maps are, on average, 20 years out of date.

Nevertheless, flooding is the costliest disaster in Canada year-over-year. For example, in 2019, flooding in Eastern Canada cost more than $200 million. It’s worthwhile to bear in mind the average cost of a flooded residential basement is more than $40,000.

Does your home insurance policy include flooding coverage?

Flooding coverage is optional in a standard home insurance policy. The Insurance Bureau of Canada (IBC) says only a small percentage of the Canadian population is at risk for what’s known as overland flooding, which is caused when water from swollen rivers and other bodies of water flows onto land, in turn, damaging homes. It is a common occurrence during the spring thaw.

But IBC also says escalating severe weather events are resulting in higher financial losses. Water-related insurance claims are up because of severe weather like heavy and extensive rainfalls. The association’s data states 2019 was the seventh most costly year on record with $1.3 billion in insured damages because of rain, snow, floods and windstorms.

There are three types of overland floods to be wary of:

  1. Fluvial. More commonly known as river flooding, which occurs when excessive rainfall over an extended period causes a river to spill over beyond its capacity. Dense snow melts can also trigger a fluvial flood.
  2. Pluvial. A surface flood (pluvial) is the result of heavy rainfall. Contrary to popular belief, surface floods can happen where there is no large body of water nearby, including urban and suburban areas.
  3. Coastal. A coastal or surge flood typically occurs in regions near the coastline of a large body of water like a lake or the sea. High tides triggered by harsh weather causes water to overwhelm coastal areas and low-lying land.

What can homeowners do to mitigate flood risks?

Floodproofing your home is an important step for mitigating the risk of flood damage. Taking steps such as installing a backwater valve in your sewer line, a sump pump in your basement, and more simple actions like keeping eavestroughs and gutters clear of debris can help make a difference.

Review your home insurance policy. If your policy does not include coverage for overland flooding, ask your insurer or broker about adding it, along with sewer backup mitigation. It may also be worthwhile to shop around for a home insurance policy by comparing policies and quotes to get the protection you and your property need.

Liam Lahey

Liam Lahey is a versatile, seasoned writer and editor. He worked as both a staff writer and freelance writer for many business and technology publications as well as for several newspapers. He writes about home, auto, and travel insurance, and is a media spokesperson for RATESDOTCA.

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