What’s the problem?
In the winter of 2013-14, the UK experienced some of it’s worst weather conditions ever, prolonged periods of rainfall created by an ‘unusually strong North Atlantic jet stream’ resulted in 17,500 flood claims. This cost the insurance industry a staggering £446 million!
In response, many household Insurers have become more reluctant to offer flood cover to properties located in high flood risk areas.
Flood cover – The basics
- You should have both buildings and contents insurance in place for your property
- Flood cover will usually be included if you have confirmed assumptions such as your property not being located within 200m of:
- a site of excavation
- a watercourse or a body of water
The comprehensive approach
Specialist insurers will provide ‘all risks’ policies for properties in high flood risk areas, fully evaluating the property rather than underwriting based on assumptions. They will consider;
- Local geography
- Local Flood protection schemes (i.e. dredging, flood walls, dams, channelization etc.)
- Whether the property has previously flooded
- The likelihood of it flooding – Insurers have four categories of risk: ‘high, medium, low and very low. If your property is deemed high risk, there is a 1 in 30 chance of flooding in any given year. A very low risk home, on the other hand, has a less than 1 in 1000 chance’.
- Whether you have signed up to the ‘Flood Warning Direct’ by the Environment Agency – A requirement by most household flood insurance specialist.
The cover is more expensive costing around ‘25% more to insure a flood-risk property’ according to the British Insurance Brokers’ Association (BIBA). However, as flood claims are typically very large (average insurance claim in 2007 floods was £24,000), this is a small outlay to pay. Furthermore, comprehensive insurers offer good Alternative Accommodation/ Loss of Rent cover (10% of rebuild cost for up to 12 month), which is particularly important if your home is uninhabitable following an incident of flooding.
Flood Re – Changing the way flood cover is priced
The UK government are in the process of finalising a new scheme, Flood Re, with all the UK insurers that will essentially cap the flood element of insurance premiums, which should bring down the cost of cover for homes prone to flooding. Under the terms of the deal, the flooding element of household insurance premiums will be capped based on the council tax band that you pay. Therefore, it will limit the cost on homeowners living in high flood risk areas. The scheme will be funded through a charge to all ‘UK insurers of a total of £180 million, which equates to a levy of £10.50 on everyone’s annual household premiums’. Flood Re has yet to be finalised, and has been met with some opposition; however it expected to be fully operational in 2016.
Whilst Flood Re is being finalised, homeowners living in high flood risk areas should look to Insurance brokers for advice on how to arrange comprehensive cover. Furthermore, the homeowner can impose some personal flood protection, take a look at our flood plan guide here.