Do I need flood insurance?

The sun is setting on a flood scene, with trees and homes peaking out of the water.

Photo by Hanny on Unsplash

Flood insurance is still pretty new to Canada—it was only introduced in 2015. And while only 19% of Canadians live in flood-prone areas, like along the coasts or in the Maritimes, the Government of Canada reports that floods are the most common natural hazard here, causing over $1 billion in damages annually. But what about you? Do you need it?

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What is flood insurance?

Flood insurance is a type of home insurance that covers losses due to overland flooding. In Canada, this type of insurance used to be quite uncommon, but the increase in natural flooding disasters due to climate change has altered that. While there’s currently no national flood insurance program, planning has begun at the federal level. For the time being, individual homeowners have to determine how (and whether) to insure themselves against floods. (Learn more about earthquake insurance.)

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Is water damage covered?

It may seem overly simplistic to ask this, “Do I need flood insurance?” But before you can answer that question, you’ll have to understand what the term “flood” means in an insurance context. To your insurer, a “flood” isn’t a catch-all term that includes that water damage in your bathroom. “People often use the term ‘flood’ to refer to water that is somewhere they don’t want it to be—no matter where it came from,” says Stefan Tirschler, product and underwriting manager for Square One Insurance Services. “Usually, the [insurance] industry will use terms like ‘overland flood’ to refer to widespread flooding events that are specifically caused by rain, melting snow, or the overflow or breaking-out of water from a dam, river or lake. This is what we mean by ‘flood’ in the home insurance world, and it is generally not included by default [in a home insurance package].” (Find out how having a pool will affect your insurance.) Good to know. If, like many Canadians, you thought that issues like faulty plumbing, toilet overflows, broken sprinkler heads or other common types of water damage were considered floods, there’s good news. While they don’t fall under an insurance definition of flooding, they are generally included in comprehensive homeowner’s policies.

Does a sewer backup count as flooding?

No—that is one exception to flood coverage and standard homeowner’s policies. A sewer backup requires specific coverage, as standard coverage won’t cut it. It’s treated differently than something like a burst pipe, which is covered. You’ll need to get sewer backup coverage added onto your insurance plan, and ensure that you have a sewer backup valve installed, as not doing so would be classified as “poor maintenance.” “[It used to be] very difficult to obtain coverage for overland flood damage across Canada,” says Tirschler, adding that most Canadians weren’t interested in paying for it anyway. “It was easy to assume that living in a ‘1 in 100 year’ flood plain meant your risk was very low.” However, events like the flooding in Calgary and Fort McMurray, plus the increase in natural disasters, have changed popular perception and the interest in flood insurance has grown.

Does my house insurance already cover floods?

“At this point in time, loss or damage caused by overland flooding is still excluded by default under most home insurance policies sold in Canada,” says Tirschler, adding that many Canadians still don’t need it. For those who do, however, there are more insurers offering it than before. “Renters insurance policies are no different from homeowners policies in this regard. Most comprehensive renters and condo policies will cover ordinary water damage by default, including things that people commonly refer to as a ‘flood,’ like toilet overflows, but they will not cover overland flooding unless the customer chooses to add that coverage to the policy.” Still, every provider is different, so Tischer notes that it’s worth shopping around. “Some [companies], like Square One, have built overland flood coverage right into [the] home insurance policy by default, for all eligible customers.”

When you don’t need it

Every home insurance provider creates its own risk maps covering so-called “flood zones” that determine pricing and eligibility. They’re meant to guide decision-making about perceived flood risk, but it’s important to understand that they are arbitrary. An insurer’s decision to call a certain area low-risk does not mean that it is safe from a flood. That said, insurers’ flood maps—along with independent mapping services like FloodSmart Canada—can help homeowners weigh the risks against the cost of purchasing flood insurance. Additionally, in some cases, the perceived risk of flood is low enough that the individual can feel relatively secure that they’d be able to bear the cost of repairs in a flooding event. (Have a fire pit? You will need to read this.)

When you do need flood insurance

Despite the arbitrary nature of the risk maps provided by insurance companies, they may be the best way to determine if your home is in a high-risk zone for floods because currently, many governmental and ministerial flood maps are unavailable or outdated. Those in high-risk areas like Manitoba, Ontario, and Quebec will likely want to consider flood insurance but, as Tischler notes, different providers have different guidelines. “If you speak to a home insurance provider, and they say you are in a high-risk zone that is not eligible for coverage, keep in mind that this is only one company’s perspective.” There’s that shop-around advice again. Ultimately, a homeowner should invest in flood insurance if they feel that the risk is too high to bear and that they would not be able to cover the costs of damage in the event of a flood. One other consideration is for renters or tenants. They may also want to buy flood insurance—even if they live on a higher floor. “An overland flood only needs to destroy the ground level in order to render the entire building uninhabitable,” Tischler notes. “If you have not purchased optional overland flood coverage, then your policy likely cannot respond to your claim in that example.”

How much insurance do you really need?

The amount of insurance you’ll need will vary depending on location, the value of your home and the coverage terms. The good news is that flood insurance can be quite affordable. Square One has coverage starting at an extra $2 per month for condo owners and renters, and $4 per month for homeowners.

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What happens if you don’t have flood insurance

Put simply, if a homeowner doesn’t have flood coverage on their policy and they experience a flood, they will be responsible for all the costs to repair or rebuild the home. “In the worst-case scenario, there will be no other sources of assistance for them,” Tischler warns. “In the best-case scenario, there may be government aid available. However, government disaster relief often will not respond if someone could have purchased their own insurance coverage, but chose not to.”