There are many stories in the news today discussing water damage and water related property claims. Perhaps you’ve heard about the rise of water claims in both frequency and severity? Perhaps you’ve suffered from a water claim? Find out why flood insurance is becoming a top priority for homeowners.
One thing everyone can agree upon water issues are increasing and not just in Canada. Whether it is the droughts in California and other places or the severe flooding in Alberta and Ontario water is top of mind for many people. Politicians, municipal staff, business owners, home and condo owners, and insurance actuaries are all looking at water in different ways.
Why has water become number 1 in both number of claims and claim costs?
4 Factors That Make Flood Insurance More Necessary Than Ever
Increase in Severe Weather Events
Setting aside the debate between those that believe or don’t believe in climate change we have seen an increase in heavy rain storms. Microbursts, or sudden, violent rain storms, inundate water infrastructure resulting in flooded streets and properties. We’ve seen this many times where severe flooding affected thousands of people in Toronto, in Calgary, in Winnipeg and many other places. This has resulted in billions of dollars of damage. The fact remains that there has been, and continues to be, an increase in extreme weather events in Canada.
Ageing and Inadequate Infrastructure
The older the infrastructure the less likely it can handle the increased volumes of rain water. Infrastructure is increasingly being operated beyond its original life span and capacity. This situation is exacerbated by extreme weather events. And because Canada is experiencing a turbulent economic period municipal budgets are not able to meet the demand of upgrading or replacing old water infrastructure at the pace needed. The drastic changes in winter weather also play a role in infrastructure as the freeze-thaw weather patterns damage ageing waterlines.
More people are living in condominiums. The number of new high rise condominium units in Ontario is increasing every year. For example, the population density Waterloo Region is predicted to increase in size by 200,000 people by 2030, but the region has almost hit its limit. This means building up rather than out. Greater population densities exert more stress on infrastructure. As well the number of finished basements has gone up drastically as people look to increase their living space.
When flooded basements occur they are now much more expensive to settle because replacing finished living area is more expensive than unfinished basement area. Finished basements mean flood insurance is more necessary than ever. The costs of prevention also has an impact on whether or not people perform adequate maintenance for their properties.
Finally, people leave on extended trips and don’t take the necessary precautions of arranging to have their homes checked by a competent adult. That means an undetected leak can turn into a deluge.
The rapid pace of construction, which can exceed infrastructure capacity, can have a negative impact on water related issues. Simply moving the laundry areas of a home from the basement to the second floor creates more opportunity for increased damage as a result of a malfunctioning washer or drain. The age and quality of construction can also be an issue with leaky condos being a major concern. Construction codes need to be updated especially in water related areas, for example requiring backup systems for sump pumps, updating requirements for foundations and for proper drainage around buildings.
Taken together these all represent huge challenges for insurance companies, municipalities and governments, and for property owners. Some insurance companies saw the average cost of a water claim in 2000, which was $5,423, increase to $15,500 in 2012 and higher today. The result has been insurance companies changing the way they deal with water claims, either increasing deductibles for water related claims, lowering limits or looking to add more coverage such as flood insurance.
What can the average homeowner do? The answer is: Plenty.
Have adequate flood insurance. Most insurance companies call their flood insurance Overland Water Coverage, but the end result is the same; to put homeowners back into their homes.
How old is your roof? A roof will eventually need to be replaced. Rain and high winds can easily cause significant damage to a roof.
What is the condition of your foundations? Are there cracks which could allow water to seep through? Remember, maintenance issues are not covered under the standard comprehensive homeowner’s policy. A good rule to think of when wondering if a water claim is covered is; Is the leak sudden and accidental? It’s always a good idea to call your broker to make sure you know what water claim situations are covered under your home, condo or tenants insurance policy.
Do your driveway and lawns around the house slope away from your foundation? It is important to have rainwater run away from the house, not toward it.
What landscaping do you have around the house that could affect water drainage? Do you have older trees whose roots could affect your foundation and plumbing? Do you have sheds that could disrupted the flow of water away from your home?
Is your sump pump in working order? Having a backup power supply for your sump pump is critical especially in severe thunderstorms where power could be knocked out for an extended period of time. You may also want a back-up generator for your sump pump in case of power outages during storms.
Some Other Things You Should Consider
Never pour fats, oils and grease down your drains or into your toilets these clog your plumbing lines.
Check your storm sewer grates to make sure they are clear of debris – Keeping the water moving away from your basement walls.
Check your eaves troughs and down spouts to make sure they are not obstructed.
Store your expensive or sentimental items upstairs – the further away from the basement the better.
A Broker Can Provide Options
Flood insurance in Ontario is a complicated thing due to different rules and regulations, different options, and even different names for flood insurance products.
An insurance broker can provide guidance, detailing the different products so that you understand what your options are.
Would you like a second opinion on your home insurance needs? Visit us here.
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Thanks for reading.
Lackner McLennan and Erb and Erb provide these informational articles to educate the public about insurance and investment related matters. This article does not substitute for broker advice regarding your specific insurance or investment needs. For a comprehensive strategy to tackle what you, your family, or your business, may need we invite you to speak directly to a broker who can guide you through all the options available to you.