Flooding and Home Insurance: Are You Really Covered?

by Kerri-Lynn McAllister June 18, 2017 / No Comments

Is your home really protected from water damage? If your dishwasher goes wonky and floods your kitchen, or if you forget to turn the faucet off and your bathroom becomes a lake, you’re probably okay. But basement damage because it rained for six days straight and the nearby river overran its banks? You might be out of luck — the cause of the water damage really matters when it comes to home insurance.

Unfortunately, severe weather is becoming more and more common. The Toronto Islands, for example, have been flooded for months, and the city doesn’t expect to allow visitors until August at the earliest. In early May, several cities in B.C., Ontario, Quebec and the Maritimes declared states of emergency due to flooding from torrential rainfall. And don’t forget the Alberta floods of 2013, which forced 100,000 people out of their homes and caused $6 billion in damage, of which just $1.72 billion was insured — the most expensive natural disaster in Canadian history.

Most insurers allow policyholders to buy endorsements — or add-on — that cover sewer backup damage. That way, if heavy rainfall overloads your sewer line and its dirty contents are pushed back into your basement, your insurance will pay for repairs. You’ll likely qualify for reduced premiums on the endorsement if you install a backflow prevention valve, which automatically closes if sewage backs up from the main line.

After the 2013 Alberta floods and torrential rains in southern Ontario, Canadian insurers began developing a new kind of coverage — overland water insurance for residential properties, which kicks in when your home is damaged by lakes or rivers overflowing. And two years later, in mid-2015, the first Canadian insurer began to offer it as an endorsement.

It doesn’t include, however, damage caused by overflowing bodies of saltwater, so seaside homeowners are still out of luck. Similarly, those living in areas at high risk for freshwater flooding, such as High River, Alta., may be excluded. Aviva Canada, for example, offers flood protection to about 95 per cent of Canadians.

As more and more insurance companies offer overland flood coverage — Aviva, The Co-operators, Intact and Square One, just to name a few — some provincial governments have decided victims of flood damage no longer qualify for disaster assistance.

“If a flooding disaster occurs and DFA [disaster financial assistance] is authorized for a disaster event, an applicant who could reasonably and readily have purchased overland flood insurance would NOT be eligible for DFA,” Emergency Management B.C. wrote in a 2016 news release.

But only 10% to 15% of Canadian homeowners have bought overland water coverage, Craig Stewart, vice-president of federal affairs for the Insurance Bureau of Canada, told the Canadian Press. He attributes this to the fact that many Canadians simply don’t know the option exists.

More worryingly, a recent study from the University of Waterloo found that just 23% of Canadians in high-risk flood zones were interested in purchasing overland flood coverage, and of those, 67% wanted to pay less than $100 per year. Even when they were asked if they’d purchase coverage that were readily available and reasonably priced, just 9% would “absolutely” do so.

To estimate your insurance costs, get a home insurance quote.

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