Yahoo Finance Why your home may not be protected against all flooding
In the wake of the devastating flood damage caused by hurricanes Harvey and Irma, Canada is still grappling with its own flood fallout.
Quebec residents are still waiting for Disaster Recovery Assistance compensation from their provincial government to repair the damage caused by the spring flooding in April and May 2017 and Ontario premiere Kathleen Wynne has been accused of dragging her feet when it comes to helping Windsor residents whose basements flooded during torrential rains at the end of September that same year. While residents remain at the mercy of bureaucracy and debates over who should and shouldn’t qualify for disaster assistance in the first place still reign, Overland Flood Insurance coverage likely could have lessened the pain.
According to the Federal Government, flooding caused $20 billion in damage between 2003 and 2012.
The problem is, Overland Flood Insurance is so new, only 10 to 15 per cent of Canadians actually have it. Many more people assume they are already covered for flooding through the water damage coverage on their existing home or tenant insurance policies, but this is not actually the case – at least, not for this particular type of flooding.
Defining your deluge
The confusion starts because there are three different types of flood insurance with very specific parameters for what is and isn’t covered.
The typical home insurance or tenant insurance policy usually includes coverage for “Water Damage.” According to Brokerlink.ca, water damage includes “any sudden or accidental discharge of water into your home.” This includes any appliance leak or overflow, a sudden pipe burst or if hail rips a hole in your roof and causes water to pour through your ceiling. Plus, any water seeping in due to cracks or other “leaky condo” problems can also be classified as water damage.
For an additional optional premium, residents can often add Sewer Back-up Insurance to their home insurance policies. As opposed to the clean water that Water Damage covers, Sewer Back-up deals with dirty water that backs up from drains, septic tanks, pipes, eaves troughs and down spouts.
Finally, there’s Overland Flood Insurance, which by definition covers water overflowing onto dry land from bodies of water. Overland Flood Insurance did not become widely available in Canada until 2015 and wasn’t even offered by major insurance companies until after the flood in Calgary, Alta. in 2013.
“It’s a bit of a chicken or the egg thing,” says Pete Karageorgos, director of Consumer and Industry Relations for the Insurance Bureau of Canada in Ontario. “Now that there’s a demand and people are seeing an increase in these natural disasters and thinking their properties may now be susceptible to overland flood risk, suddenly there’s a need for insurance companies to start mapping out flood risk across Canada and begin offering Overland Flood Insurance to greater numbers of people.”
Karageorgos maintains that Overland Flood Insurance was offered in limited quantities prior to 2013, but it was only desired by those who lived near water, making it prohibitively expensive since they had the greatest risk. But now that climate change has increased the risk of flooding for many more people, insurance companies can spread the risk over greater numbers, make it much more affordable. Still, Karageorgos says only about ten to 15 insurance companies even offer Overland Flood Insurance in Canada and some only carry it for certain provinces. For a comprehensive list of providers, click here.
Restrictions, exemptions and other things to keep in mind
With insurance companies, there are always going to be properties that are of too great a risk and are completely uninsurable. Be aware that different insurance companies may have a different radius from the water they deem within their uninsurable boundary.
“One insurance company may say ‘I’m not going to write any policies for any insurers within 100 metres of a shore line’ and another company may say that their underwriting profile is that they’re not going to underwrite any properties within 300 metres of a shoreline. Typically there’s always going to be properties no insurance company will offer insurance for or if they do offer insurance, the price will be so prohibitive, homeowners may not be able to afford it,” says Karageorgos.
Depending on the insurance company, Overland flooding sometimes only covers flooding from fresh water, it does not cover flooding due to tidal waves, tsunamis or any body of salt water natural or man made, such as this policy from Aviva’s Excalibur Insurance. Some policies require you to already have Sewer Back-Up insurance before buying Overland Flood Insurance as an add-on to your coverage. However, in many cases it can cost less than the Sewer Back-Up coverage itself. Also, Overland Flood Insurance is not a maintenance contract. If the flooding in your home could’ve been prevented by proper waterproofing and regular maintenance, you will very likely not be covered.
If your property does qualify for coverage, you will likely be able to start a claim and receive payment faster than any provincial disaster assistance program can offer.
“In Windsor, the provincial government recently decided that certain homes that were flooded qualify for disaster relief. Determining which homes they were took time and you have to wait for the adjustment process to take place. With insurance, as long as it’s something your covered for, you can start a claim right away, whereas provincial disaster relief must first approve that they will provide compensation and wait for a state of emergency,” says Karageorgos.
Some jurisdictions like Nova Scotia will not offer disaster-related compensation for insured losses or potentially insured losses, so if you could’ve covered the damage with insurance, you’re out of luck. Some jurisdictions, like Windsor, will cover you for overland flooding but will not offer relief in the event of a sewer back-up unless the claimant makes less than $36,002.
Insurance policies have their own limits as well. Many policies are capped at different amounts for different types of flooding, whether they be water damage, sewer back-up or overland flooding. Plus, each type of coverage may have a different deductible, so be sure to shop around and choose policies that will actually provide the coverage you need.
“Policies vary by companies and one company may offer different tiers of coverage at different price points within the same policy,” says Karageorgos. “Many times people are focused on the bottom line cost, rather than the type of protection offered. There are differences and you may be covered for more if you choose to be. We encourage people to know their options and understand what options are available to them.”
