As catastrophic floods become more common, more Canadians are opting for specialized insurance coverage, but rates could rise as insurers re-evaluate risk because of events such as those currently unfolding in British Columbia.
Overland flood insurance is different from generic home insurance, which usually only covers water damage from things such as burst pipes or damaged roofs. In fact, flood insurance has only been offered since 2015, a few years after widespread flooding in Calgary caused billions in damage in the region.
The Insurance Bureau of Canada (IBC) says an uptake of flood insurance is growing quickly, and roughly 50 per cent of Canadians were covered for overland flood insurance in 2020, compared with 20 per cent in 2017.
The bureau says the vast majority of Canadians can get overland flooding insurance for between $100 and $300 a year, while others in higher-risk areas can expect to pay between $500 and $1,000. But as once-rare events such as the floods in B.C.’s lower mainland begin to happen more often, there is upward pressure on premiums.
“We’ve been tracking insurance payout for severe weather events – things like storms, fires, floods – going back to the eighties,” said Aaron Sutherland, IBC’s vice-president of Western and Pacific, who said it’s important to treat those weather events as a trend, rather than a fluke.
“Where the industry used to just pay out a few hundred million dollars annually for those claims, more recently that number has ballooned to more than $2-billion each and every year just for claims associated with a changing climate.”
In B.C., 5 per cent of people live in homes that have such a high risk of flooding that insurance isn’t even available, Mr. Sutherland said. Flood insurance premiums generally top out at around $1,000 a year, he said, at which point it becomes no longer available.
He added there were likely people in the flooded Sumas Prairie area in Abbotsford who fell under that high-risk banner and were uninsured.
John Shmuel, managing editor of Ratesdotca, said flood insurance hasn’t been top of mind for many homeowners in the past, but people need to seriously consider any risk of a flood when purchasing a home.
However, he said it can be difficult to access that information in Canada because there isn’t a national floodplain map, and many maps that are available date back to the 1980s.
“You can’t buy a home and see exactly if your house has been built on a river that’s been redirected, or a former floodplain,” Mr. Shmuel said, adding that prospective homeowners should do their own research and consult with insurance agents before buying a home.
“Most people, it might not even be something they think of when they’re buying a house … but I would not make that mistake, especially based on what we’re seeing with so-called ‘one-in-a-hundred-year’ events becoming much more frequent.”
Ian Lee, an associate professor at Carleton University’s Sprott School of Business, said he’s seen what the worst-case scenario can be in some of the communities around the Ottawa River after it flooded.
“I’ve heard anecdotally that those homeowners can’t get flood insurance now – there’s just too much risk,” Prof. Lee said.
“Some cities, because they know they’re on the hook for some sort of support for the homeowner, are actually pro-actively saying we’re not going to allow you to rebuild on a floodplain, and there are other municipalities that are saying we’re going to rezone these areas.”
He says the Canadian government is working on a national flood insurance program for those in high-risk areas, but the details of what that coverage would look like, and what the cost would be, are still unclear.
In the meantime, there are measures people can take to reduce premiums if they’re facing higher costs.
Mr. Sutherland said since overland flood insurance can often be paired with standard water-damage insurance, installing a sump pump (which can remove water accumulating in a basement) or a back-flow valve (which prevents sewage from going the wrong way out your pipes in adverse weather) can be a way of further protecting your house and lowering your premiums.
He added homeowners can opt for a higher deductible or a lower maximum payout as well if they’re under financial pressure. While some insurance plans cover the full amount of damage to a home, others can have maximum payouts between $25,000 and $50,000.
Finally, receiving a payout can take anywhere from weeks to months, Mr. Shmuel said, since insurers will sometimes send out an adjuster to verify your claim. He said it’s paramount to start your claims process as soon as possible.
“You want to keep track of everything that’s been destroyed, any receipts you have,” Mr. Shmuel said.
“Whether you’re in a car accident or your basement is flooded, the sooner you claim, the fresher your memory is going to be.”
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