Does your client think overland flood coverage is standard?

Brokers have another golden opportunity to educate clients on the importance of overland flood coverage.

A recent survey of Canadian homeowners conducted by rate aggregator LowestRates.ca found that 30% of 544 respondents were unaware that coverages like overland flood are add-ons to a standard home insurance policy. Only 9% added this type of coverage to their policies last year.

According to the LowestRates.ca study (conducted online from Mar. 12-15), when homeowners were asked if they purchased add-on insurance in the last year:

• 30% responded they were not aware or thought water/earthquake coverage was included
• 29% considered add-on insurance, but did not add it
• 21% added on internal water damage (sewer back-up)
• 9% added external water damage (overland flooding)
• 8% added earthquake damage coverage
• 4% inquired about add-on insurance for flood or earthquake, but were declined.

Overland flood coverage was generally unavailable on home insurance policies until 2015. At that time, several insurers began to offer it, prompted by massive flood losses in southern Alberta in 2013. Currently, about 30 insurers offer overland flood protection, says Insurance Bureau of Canada (IBC) communications manager Mark Cripps. “According to feedback from member insurers, the take-up rate in most provinces has grown steadily every year since the inception of the product,” he says.

Overland flood covers damage from water running over the surface of the ground and through doors and basement windows into homes. On the other hand, sewer back-up occurs when the water table rises or when urban sewer pipes become pressurized during a storm. The build-up of pressure causes water to reverse back up through the main outflow pipe in the house to emerge through drains in showers, sinks or toilets.

Wind, ice and fire damage are typically included in most home insurance policies, while overland flood, sewer back-up and earthquake insurance are only available as endorsements. Coverage for these endorsements also varies from insurer to insurer. “IBC has been on the frontlines of flooding events and has been advocating for better flood defences for a long time,” Cripps says. “Using multiple mediums (traditional and social media) and in working closely with federal and provincial governments, IBC and its members promote the importance for consumers to add an overland flood endorsement to their home insurance policy.”

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Overland flooding was in the spotlight last year, when British Columbia saw its costliest severe weather event from flooding ($515 million in insured damage). But because overland flood endorsements are relatively new across Canada, only about half of policyholders have the coverage, IBC’s director of consumer and industry relations, Rob de Pruis, told Canadian Underwriter recently. As well, in B.C., only 5% of homeowners are unable to purchase flood insurance because they live in a high-risk area, IBC reported in November.  

IBC estimates one in 10 Canadian homes is at high risk of flooding in the next 20 years, with some at risk of repeated flooding. The good news is, Emergency Preparedness Minister Bill Blair reported Mar. 17 flood maps are being developed in partnership with provinces, territories, municipalities and Indigenous organizations. This will also facilitate the development of a new national flood insurance program.

“The most important aspect of this announcement for IBC and the industry is the commitment to a national flood program – not just a high-risk pool,” Cripps says. “This is something IBC will continue to advocate for as insurers have made it clear that flood mapping/risk modelling, physical mitigation, improved building codes and land-use planning are all necessary parts of Canada’s response to flood risk.”

LowestRates.ca expert and licensed insurance broker Steven Harris says in a release that flood risk information “needs to be more available for Canadians who are making quick and expensive home purchases in a hot market, often with little-to-no opportunity to assess their prospective property’s disaster risk.”

Cripps adds communities need to consider hazards and risks when making decisions on where to target limited resources for infrastructure and flood defences. “Currently, the tools being used to assess flood impacts do not provide a complete picture,” he says.

Existing flood risk hazard maps used by governments focus on fluvial and/or coastal flooding. However, flood risk maps used by insurers include pluvial flooding risks which identify where water goes from all flood risks and what it may affect – homes and businesses, Cripps says. Using both flood hazard maps and the new flood risk models have allowed insurers to better understand flood risk, which has allowed them to develop and accurately price new products.

In the March 2022 announcement by Blair, the federal government indicated its commitment to produce comprehensive flood maps for the entire country and an online flood portal that will provide easily accessible information to assist homeowners, municipalities and provincial and territorial governments in deciding whether to rebuild or relocate after a flood.

Feature image: A property affected by November flooding of the Nicola River is seen on the Shackan Indian Band, northwest of Merritt, B.C., on Thursday, March 24, 2022. THE CANADIAN PRESS/Darryl Dyck