Understanding the perceptions and realities of flood protections and coverage is important in assessing the real risk to real property from flooding, especially as major floods hit many parts of the country.
Coverage Has Changed
Since the last major floods in 2013, various insurers are now offering overland insurance. This has major ramifications for homeowners (and mortgage lenders and insurers). The reason: government disaster relief is not available where the homes could have been covered by insurance policies.
More details below:
Under the Disaster Financial Assistance Arrangements (DFAA) program, Ottawa provides relief to homeowners and others hit by major disasters through provincial governments.
When the Alberta floods hit in 2013, no insurance company in Canada offered “overland flood insurance,” so called to distinguish it from sewer-backup insurance, which is widely available. Overland flooding damage occurs when rising water enters a home through windows in the basement, for example.
Within the last two years, private insurers have begun to offer this specialized add-on to basic insurance, although sometimes with substantial premiums based on a region’s likelihood of flooding. Understandably, the higher the risk, the higher the cost.
That change means some homeowners may be unaware that they might not see government compensation during the next disaster.
Under the DFAA program, homeowners are not eligible for reimbursement for repairs that could have been covered by insurance policies.
Explained Blair Feltmate, University of Waterloo climate-adaptation expert to the CBC, “In the last 12 to 18 months, many of the major insurers now do offer overland flood coverage — thus, if a homeowner now decides not to purchase this coverage, they would not qualify for overland flood compensation through DFAA.”
Even in areas where overland flood insurance is available, Public Safety spokesman Andrew Gowling told the CBC that homeowners could still get relief from their individual provincial or territorial governments.
“Decisions to provide funding directly to individuals would be made by the provincial or territorial governments on a case-by-case basis, as they consider appropriate,” he said.
“Public Safety Canada continues to work with key stakeholders, including provinces and territories and the Insurance Bureau of Canada (IBC), to explore options for a national approach to facilitate the ongoing entry of the insurance industry into the residential flood insurance market.”
The average cost of restoring water-logged basements in Alberta and Toronto in 2013 was more than $40,000 for each homeowner, Mr. Feltmate said.
Surveys Say: Canadians Misinformed
According to a poll commissioned last summer for Public Safety Canada:
- 54% were not concerned about flooding
- 40% believe that the government will take care of them and their home if there is major overland flooding
- 74% had done nothing to protect their homes
This contradicts a few realities.
- According to Mr.Feltmate, “It is simply a matter of time before all homeowners experience overland flooding.” The IBC estimates that between 800,000 and one million Canadian homes are in high-risk zones for floods — about 10% of the total housing stock.
- Further, although many Canadian homeowners believe they will get federal compensation for basements flooded due to severe weather, the reality is quite different. Says Mr. Feltmate, “For the vast majority of people, this is not the case; this perception highlights the need for continued consumer education and the need to set the right expectations to ensure homeowners prepare financially to support themselves in the event of flooding.”
- If the risks of flood are high and many homeowners actually do not have overland coverage, protecting a home would seem logical. Says Mr. Feltmate, homeowners need to take more financial responsibility for potential flooding of their properties.
Another survey, which was conducted by the University of Waterloo, highlights additional risk and supports the findings of the poll by Public Safety Canada:
- 70% per cent of respondents had not been approached by their insurance provider about overland flood insurance
- Very few homeowners saw themselves as being at risk or knew if they were covered or not, “despite the fact that we know for the next 50 years that flood risk is going to increase”
The costs of damage resulting from severe weather linked to climate change, and to natural disasters, are mounting. Here are some sobering stats:
- Insured damage hit a record $4.9 billion in 2016, according to theIBC
- After the 2013 floods in Toronto and Alberta, the costs for the federal government’s DFAA disaster relief program reached a record $1.4 billion, and have climbed each decade
Pete Karageorgos, director of consumer and industry relations with the IBC points to a 2016 flood in Windsor and Tecumseh, Ontario to illustrate how expensive flooding can be for homeowners, and how common it is for people to be caught unaware by their lack of coverage.
“In many cases there weren’t policies that had flood insurance, and those that did, there were usually limits,” he said to the CBC.
One Windsor resident’s house sustained about $50,000 of damage, but his insurance policy only covered one-fifth of that.
Cautioned Mr. Karageorgos: many policies might list coverage for water damage, but that refers to incidents like burst pipes or overflowing toilets, not severe weather and flooding.
He said homeowners should also be aware that if water is entering the basement by a crack in the foundation, for example, it falls under the category of seepage and could signal a maintenance issue that would also prevent an insurance payout.
Among practical measures most experts recommend:
- Extending and directing downspouts away from the basement
- Covering window wells with plastic to keep out heavy rain
- Grading the land to direct water away from the building
- Using a battery backup for sump pumps
It Will Be Needed
Risk across Canada continues as spring showers continue and snows melt:
- Quebec: More than 4,100 residences in Quebec have been affected by the floods and more than 3,000 people have had to leave their homes
- Quebec Premier Couillard is saying that provincial government flood damage compensation likely to increase
- Quebec’s program for flood damage subsidies, which tops out at $159,208, is currently under review, Mr. Couillard told a news conference in Gatineau in western Quebec alongside Prime Minister Justin Trudeau
- Ontario: In the Ottawa area, there has also been quite a bit of damage, but for some residents the compensation is different; according the CBC and City of Ottawa officials, as of May 8th 310 properties have been flooded in the municipality but may not quality for provincial disaster relief funding
- BC: Kelowna and area is now at risk; the mayor of Kelowna is warning residents to prepare for dramatic flooding expected to begin Thursday evening as heavy rain returns to the southern Interior