Five Things You Need To Know About Insuring Your Property Against Flood

1. Millions of households are at risk from flooding

Around 5m, or a sixth of the properties in England, are deemed to have a higher than normal risk of flooding but only around half are from rivers or the sea. The rest are at risk from rising groundwater, sewer problems and flash flooding. According to the Association of British Insurers, just 55% of those living in flood risk areas are aware that their home is at risk. At least 350,000 properties are considered to be at such high risk that the industry accepts they are not a viable commercial risk for the industry. You can check your risk of flooding at Checkmyfloodrisk.co.uk or the Environment Agency website.

2. You will get insurance, but at a potentially steep cost

Buy a home insurance policy and one of the first questions you’ll be asked is whether your home has ever flooded. If you answer yes you can expect a lot more questions, significantly higher premiums, or possibly a flat refusal.

Under the terms of an agreement with the government, insurers should continue covering existing customers. But because they are free to increase premiums or set punishingly high excesses for flooding claims, many properties remain uninsured. If householders want to move to a new insurer they may find they are declined altogether.

Anyone moving into a high risk area is likely to find they will not be offered affordable flooding cover, although from next year a scheme comes into force to alleviate this situation (see No 3).

It is worth using a specialist broker or shopping around, some insurers are better equipped to calculate risk than others. If you can answer no to the question about previous incidents then cover for flooding should be included in a standard domestic policy. Most buildings policies will pay to return the home to a habitable condition and for alternative accommodation while the work is being done, which can easily last nine months or longer. For contents, some insurers will replace old items for new, others won’t check before you buy up to the maximum payout limit.

3. There is hope for the worst hit from next year

An insurer called Flood Re is expected to open from April 2016. It is an industry-wide initiative which means individual insurers will be able to share the flood risk element of a buildings and contents policy on to Flood Re, which in turn will pay out future claims. It is aimed at the estimated 350,000 households who are at significant flood risk and struggle to access affordable insurance.

Crucially, there are maximum charges the insurer will ask the consumer to pay for the flood risk component of the policy. This is set according to council tax bandings and starts at £210 a year for houses in bands A and B, rising to £1,200 a year for a large band H residence. This for both buildings and contents cover. Consumers buying just one of these will pay less, but note this is just for the flood element – the total premium price will be higher. A householder in a middling band D home will pay £168 to Flood Re for just buildings cover, or £108 for contents-only cover. If that sounds a lot, it will feel like a huge saving for the residents of Cumbria.

The scheme will be managed behind the scenes, meaning consumers will be offered a single premium by their insurer as they are now, with premium paid over to the scheme. Claims will be similarly handled as they are now by the insurer.

How long the scheme would be able to operate in the face of several large claim events remains to be seen. It also doesn’t include business cover, much to anger of companies and retailers in recently affected areas.

4. Vendors must tell you if they have experienced flooding

When buying an existing home the vendor must tell you of any significant flooding incidents when they fill in the Law Society’s property information form for conveyancing. Any issues will emerge when you apply for a mortgage, as banks won’t lend money on a home likely to be trashed by a major flooding event.

The ABI says around 20,000 properties are built in flood risk areas a year, including 4,000 in areas of significant risk, which is in part why the government has been working on the scheme to make sure there is cover in future.

5. If your area is seriously flooded, rent a new home urgently

Some of the victims of terrible flooding liken the experience to a death in the family. They also describe the scrabble to find rented accommodation in the days afterwards. Having visited two areas post flood I quickly came to the conclusion that the fist thing to do before you clear out the kitchen is to start ringing estate agents. The best positioned rental homes soon disappear.

In Humberside 2,400 people spent many months living in caravans after the 2007 summer floods as there was nowhere else to go. That said, caravans should not be dismissed entirely. Some Carlisle residents lived in caravans parked on their drives. This meant they were on hand to direct the building work as it happened, rather than spending hours on the road. Those that have been through the experience say victims also tend to throw out too much staff in the immediate aftermath. Furniture may not have been contaminated or can be restored and saved.

The smoothness or otherwise of the insurance claim appears to depend on the quality of the loss adjustor appointed. In some cases victims have had to appoint their own to get fair treatment. Flood proofing a home against future events by putting in solid flooring and electrical wiring half way up the wall will also make a big difference when it comes to rebuilding if the worst happens.
When buying an existing home the vendor must tell you of any significant flooding incidents when they fill in the Law Society’s property information form for conveyancing. Any issues will emerge when you apply for a mortgage, as banks won’t lend money on a home likely to be trashed by a major flooding event.

The ABI says around 20,000 properties are built in flood risk areas a year, including 4,000 in areas of significant risk, which is in part why the government has been working on the scheme to make sure there is cover in future.