Flood Coverage Under a Homeowner’s Policy? Not Going to Happen!

Canada’s most frequent re-occurring natural hazard is one to which other parts of the world are now encountering with greater frequency.

Flooding.

As referenced previously in TheRiskFactor, flooding is particularly painful in Canada because overland flooding is not covered by Canadian homeowners’ insurance policies.

Coverage can be purchased for plumbing overflow and sewer-back, and many policies extend to insure against water damage due to ice-damming on roofs.  Vehicles are often covered, and flood coverage is available on commercial buildings (particularly larger property schedules).

But often, the majority of property damage is incurred by homeowners – and the only available funding option is government aid, and then only if the authorities opt to offer such.

That has led to a renewed discussion within insurance and financial circles as to whether flood should be included as an “insured peril” under Canadian homeowners’ policies.

Think it will happen?   Consider the US experience.

The National Flood Insurance Program (NFIP) sits at approximately $18 billion in the red as a hangover from Hurricane Katrina (2005).  And that was before the massive flooding resulting from Hurricane Irene in late August.

Many flood damage programs require government financial participation, and the NFIP is largely backstopped by the US government.   But the program desperately needs additional funding – and given the financial hangover currently experienced by U.S. governments (state and federal), any financial injection will require a titanic battle.

Tags: claims, coverage, damage, environment, flood, home, homeowners, insurance, risk, water, weather