Homeowner insurance in flood situations

In every other G8 country homeowners can purchase insurance against the effects of ‘overland flood’ but not in Canada. Canadian home insurance policies generally include coverage for sewer backup and perhaps for burst water pipes, but when your home is flooded by overflowing rivers, storm surges, or torrential rains you are out of luck, reliant only on government disaster relief. Apparently most Canadians do not know this.

In 2010 the Ontario-based and insurance industry funded, Institute for Catastrophic Loss Reduction, with help from the global re-insurer Swiss Re, published a discussion paper Making Flood Insurable for Canadian Homeowners. This was followed up by a presentation from ICLR Managing Director Glenn McGillivray.

The reason that Canadians cannot buy flood insurance for their homes seems somewhat cloudy but factors may include that flood mapping is not sufficient in Canada for insurers to properly evaluate risks and that governments like to be seen to be dispensing largesse in times of disaster.

In GallonDaily’s opinion neither is a satisfactory rationale. As the ICLR report points out, one good reason for allowing homeowners to purchase flood insurance is that it brings them face to face with the flood risk faced by their chosen home. Canadian municipalities and provinces need to face the reality that building on flood plains is just plain stupid. Allowing home buyers to face the reality of paying for flood insurance will help bring that message home to voters. Sustainable development means minimizing risks, not putting homes in the path of natural disaster.

The 61 page report Making Flood Insurable for Canadian Homeowners is available at http://www.iclr.org/images/Making_Flood_Insurable_for_Canada.pdf

Glenn McGillivray provides an excellent summary at http://www.iclr.org/images/Flood_insurance_speech_Nov_2011.pdf

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