IBC New Low-Cost Flood Insurance Program

As water damage reigns supreme as one of the most common reasons for property insurance claims in Ontario, as well as other regions in Canada, the Insurance Bureau of Canada (or IBC) has decided to put forward a plan via the federal government to introduce a new low-cost flood insurance program.

As vice president of the climate change and federal issues at IBC, Craig Stewart declared that the organisation’s hope was that the implementation of the program would be somewhere within two years. In this article, we will go over the details of this new lost-cost flood insurance program, how flood insurance can help Ontarians province-wide, and what it means to be insured against flooding.

What is the program’s focus and how will it help?

Historically, flooding has been one of the most uninsured perils for Ontarians, yet it remains to be one of the highest risks. This is even truer for homes that are situated on flood planes or are in near proximity to large bodies of water. With some 1.5 million households having a high exposure to flooding, it only makes sense that these homeowners should purchase flood insurance.

However, flood insurance is not always available to high-risk homes. That’s what this program intends to resolve – it intends to protect, with funding of $31.7 million over the course of three years, vulnerable Canadians who are unable to obtain insurance or find flood insurance that is reasonably priced. This flood insurance program will be designed to cover damages resulting from riverfront flooding, urban overland flooding, and storm surge.

Another issue that the new program might address is access to alternative living arrangements for Indigenous communities, who might live in areas insured against flooding but do not otherwise have expenses covered for temporary housing. While federal grants and funding from the Canadian Red Cross can come into play, this funding is often difficult and time-consuming to get. This program might offer a quicker alternative to ensure vulnerable families and households can be housed appropriately in the face of a crisis, until their homes are safe to re-enter.

The federal government is already taking steps forward to design this program with guidelines for policy makers

The federal government has now moved forward with the release of a flood risk report which will outline guidelines on how policymakers might move forward with the creation of their national, low-cost flood insurance program. This report was titled, “Adapting to Rising Flood Risk: An Analysis of Insurance Solutions for Canada.” The report came from the Canada task force on Flood Insurance & Relocation, and it serves to provide information/evidence to guide the decision-making of underwriters, while also clarifying special consideration for strategic relocation of those deemed most at-risk.

Recently, the government had also confirmed in a release that it is currently creating a Flood Hazard Identification & Mapping Program, as well as an online flood risk portal, in a first step forward to ensure that flood risk information may be made more accessible to the general public. The hope here is to create a greater awareness of the risk that flooding poses, and to encourage members of the public to enroll in the low-cost flood insurance program.

Industry-wide, there has been a chorus of support for the publication of this report as well as the government’s apparent commitment to the creation of this flood-insurance program. With an estimation from global engineering and architecture services firm GHD, floods, droughts, and major storms are proposed to cost the Canadian economy, overall, roughly $139 billion over the course of the next three decades. This program, through a public-private partnership, should be what is necessary to address the exponential financial risk to Canadians that climate change and flooding poses.

What does it mean to be insured against flooding?

With no home “100% safe” against flooding, it’s important to address just how being insured against flooding can save your home from financial devastation. In fact, just one inch of water in your home could result in over $25,000 worth of damages.

See, most home insurance policies do not include flood insurance, and may only do so once a flood insurance endorsement has been purchased. As mentioned previously, not every  homeowner is even eligible for flood insurance, since insurance companies may not provide coverage to those who live on flood planes or are at particularly high-risk of being flooded.

That’s, thankfully, where the new federal government low-cost flood insurance program will come into play. But what exactly does it mean to be insured against flooding?

Your home policy may already cover some instances of water damage, such as ice damming causing a roof to leak, overflow from appliances, leaking hot water tanks, and water from above-ground pools coming into your basement windows. It will not, however, cover sewer backup (which can be insured by another endorsement – a sewer/septic backup coverage endorsement) and it will not cover rain accumulation, accidental dam break, heavy rain and surface water entering the home, or the overflow of a body of freshwater or lake. Note that oceans are generally not covered at all, even by a flood policy.

Overland water coverage, or flood insurance, might cover the things that a standard home policy leaves out. It’s actually relatively new in the world of insurance, especially as climate change has worsened homeowners’ vulnerability to this particular exposure. Flood insurance, as a general rule of thumb, covers damage caused when groundwater comes through a home’s foundation, walls or basement floors, or even through a sewer line. It covers the overflow of a river, lake, or other body of water resulting in freshwater floods, and may also cover the sudden/accidental accumulation of water as a result of heavy rainfall.

All in all, overland water coverage – or flood insurance – either privately or through a public-private insurance program can be the thing that saves Canadians from financial devastation. Give Excalibur Insurance a call today to discuss your eligibility for private flood insurance, or ask us for more information about what flood insurance can do for you.