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Flood Insurance in Canada: What You Need to Know

  • Corey
  • Nov 30, 2016

Despite major floods across Canada, it’s only now that insurance companies are offering some sort of flood protection. Although automatically included in your premium rate, there are definitions and exclusions that homeowners need to be aware of. The next time you’re shopping for a home insurance policy, look for one that includes inland flood protection, but before you sign up, know the difference between water and flood damage, the various sources of flooding events, the extent of flood coverage offered in Canada and government aid that may help when your policy can’t.

Water Damage vs. Flood Damage

Although many homeowners may not see a substantial difference between water damage and flood damage, insurers will be quick to point them out, especially because the latter is usually not covered even in a comprehensive policy.

Water damage can be incurred from a burst pipe — home insurance will cover that. On the other hand, flooding refers to an overflowing amount of water making its way over what is normally dry land. When this spillage enters your home through doors, windows or other openings and causes damage, that is called flood damage.

Types of Flood Damage

Flood damage can occur under a number of circumstances like heavy rainfall and tidal flooding.  There are three types, river floods, urban floods and coastal floods, and all of them have occurred across the country.

River Floods

Essential for geology and biology and an integral part of the country’s history, rivers in Canada are large and long enough to be featured alongside the world’s record-breaking rivers, according to Environment and Climate Change Canada. But rivers also mean flood risk, especially for homes located on floodplains. Streams and lakes can be equally damaging.

During Hurricane Hazel’s arrival in Toronto in 1954, rising water levels caused the Humber River to flood, the consequences of which were disastrous. An entire street of people and houses were washed away because of it. Heavy rains also caused the Etobicoke Creek to flood, killing seven people and sweeping entire homes away.

Urban Floods

The second type, an urban flood, is controllable to some extent. It results from the inadequacies of infrastructure that is supposed to drain water runoff generated from rain storms, snowfall and melting snow during springtime. A good example of this occurred recently in Toronto.  

   

According to the Insurance Bureau of Canada, the 2013 storm and flash flooding episode was the costliest natural disaster in the history of the province, resulting in more than $850 million worth of property damage. In response, the government pledged $3.1 billion over 10 years to improve the city’s wastewater and stormwater collection system.

Coastal Floods

A coastal flood, as indicated by its name, is flooding that occurs on dry land that sits along a coastline. High tide, rough winds and strong waves can combined to produce disastrous consequences like tsunamis. The 2004 Indian Ocean earthquake and tsunami duo is one of the most infamous examples of a coast flood. The 9.1 magnitude quake left about 228,000 people dead and $10 billions in damages.

Flood Insurance in Canada

As mentioned already, flood damage tends to fall into the exclusions category of a policy. Although some insurers are beginning to offer inland flood protection, the norm is no automatic coverage in a standard home insurance policy. There are restrictions and exclusions amongst insurers who do offer this service.

Inland flood protection covers damages resulting from an overflow of freshwater or wastewater from lakes, rivers, streams, reservoirs, canals and dams. The overflow can also be generated by melting snow or heavy rainfall that hasn’t drained properly.

Flood protection can be as low as $2 to $4 dollars, but this will depend highly on your home’s location (i.e. high or low flood risk zone). Even companies that offer flood protection will sometimes deny coverage to homes in areas with a high risk of flooding. The downside of this protection is that it provides no coverage for coastal flooding, so damage caused by rising sea levels or a storm surge will not be compensated.

Government Help during Natural Disasters

Luckily, there is some help from the federal government for natural disasters that are not covered in an insurance policy. The Disaster Financial Assistance Arrangements aid provinces and territories in the event of a major natural disaster. Funds may also be extended to residents, communities and small businesses that have been affected, but the compensation can only be used to repair damages caused by uninsurable events.

Specific provinces have their own fund sources. In Ontario, for example, the Ontario Disaster Relief Assistance Program may provide up to 90 per cent of repair costs, if the losses are not covered by an insurer. These programs should not be considered a substitute for insurance.    

Until recently, Canada was the only G8 country to not offer flood protection for homeowners. According to Square one, a British Columbia-based insurance company, the reason behind this is not an a scarcity of flooding events. In fact, there have been 36 major inland flooding events over the past century, which demonstrates that you don’t need to build a home by a river to suffer flood damage. The best solution for this is inland flood protection. Signing up for a policy that automatically includes it will ensure both peace of mind and protection.   

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