Flood Insurance in Canada: Is Your House in a Flood Zone?

Homeowners have felt the financial pinch of flooding and thus, have questions about floor insurance. Flooding has surpassed forest fire as Canada’s top cause of property damage. Six per cent—and up to 10 per cent—of homes across Canada are already uninsurable for flood risk.

As major floods have become more common in communities across Canada over the last decade, it has brought the issue into mainstream consciousness. However, despite growing awareness, homebuyers purchase homes in flood zones without knowing the risks and the protection they need.

With so many homeowners living in high-risk regions, we wanted to examine the importance of flood insurance and share tools that can help determine if you live in a high-risk area.

What is flood insurance, and what does it cover?

With the rise of extreme weather and flooding, Canadian homeowners search for increased protection, including securing the right flood insurance coverage. But, the numbers show that they are falling short.

Your home insurance policy may have provisions for a burst pipe or flood due to an appliance malfunction. Even though you may refer to this type of incident as “flooding,” insurance companies typically classify these events as “water damage.” Flooding is generally an add-on to a standard home insurance policy.

Flooding caused by Mother Nature is called “overland flooding.” Flood insurance covers overland flooding and may even incorporate other forms of flooding, including sewer backup, extreme rain, or waves from a storm or hurricane. You may need a comprehensive water or flood insurance policy (or an all-risk policy) to get this coverage.

The terminology differs between insurance companies, so you may want to ask about two add-ons to supplement your policy. The first is sewer backup coverage. It covers water damage from a blockage in the main sewage line. The blockage causes wastewater to reverse direction and flow up into your home.

The second add-on is overland flood coverage. In addition to an overflowing body of water, this protection may cover damage from heavy rainfall and melting snow.

The average claim caused by flooding damage is $43,000. These add-ons may cause your insurance to rise by a few hundred dollars, but they could protect you from a massive reconstruction bill in the future.

Even if you don’t live near a body of water, your home could still experience these other forms of flood damage. It is essential to talk to your insurance provider to see if you are covered.

The federal government does provide financial support to those impacted by flooding. In a large-scale natural disaster, the Government of Canada offers financial assistance for recovery to provincial and territorial governments through Disaster Financial Assistance Arrangements (DFAA). However, there are limits to this coverage. The best course of action is to ensure protection through a home insurance policy.

Examining your home’s flood insurance coverage?

Ninety-four per cent of Canadians who live in flood zones are unaware of their potential risk, according to data from the University of Waterloo and The Co-operators. Without knowing the risk of flooding, it is tough to protect yourself from the risks and costs associated with flooding.

One reason for this lack of coverage is a lack of transparency. There is no legal requirement to warn homebuyers that they are moving into a potential flood area, leaving Canadians vulnerable and at the risk of significant financial losses.

You should ask your insurance agent if flood insurance is available to you. If it is, what type of damage is covered, how much does it cover, and what sub-limits or deductibles apply. These simple questions could end up saving you thousands of dollars.

The Insurance Bureau of Canada (IBC) estimates six to 10 per cent of Canadian homes are uninsurable due to flooding. That number could climb as insurance companies calculate risk assessments to account for the rising threat of climate change.

The IBC proposes the public sector step in to support Canadian property owners. They suggest a national high-risk residential flood insurance program, which would provide insurance to residents in the most flood-prone areas, funded by the federal government.

Is your home in a flood zone?

A flood map outlines areas that are at the highest risk of flooding. Flood maps provide homeowners with the data to make informed choices about their property. The maps also provide stakeholders with the necessary information to manage flood risk, planning, and emergency preparedness decisions.

Canada has lacked an effective flood map system. Current maps primarily focus on land use planning and engineering but rarely contain information about potential consequences. The existing maps are highly technical and do not help the typical homeowner understand flood risk.

Flood hazard maps are decentralized and incomplete. Municipalities and conservation authorities develop the maps and local information, but it is not available within a central database for Canadians.

The most effective form of flood mapping for Canadian homeowners is flood awareness maps. They provide a narrative along with the flood map. They detail the history of flooding and show the potential for future flooding. Unfortunately, they are not readily available.

Flood insurance and the home-buying process

Because there is currently no flood hazard mapping program available to Canadians, it is essential to speak with your insurance agent. They may have access to flood-risk data through their proprietary systems.

If you are in the home buying process, it is good to check in with your insurance agent when you are ready to put in an offer. It will give you a sense of what type of expenses and risks are associated with that property, allowing you to make a more informed choice.