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Homeowners adrift assessing flood insurance

Steve Wagler of Josslin Insurance notes the shifting risk factors in flood coverage. [Veronica Reiner / The Obsever]

Many of us don’t know the extent of our flood insurance coverage until after a claim’s in progress. But even for those interested in learning more about the risks, good information is hard to come by in Canada, according to a new study by researchers at the University of Waterloo.

The study examined available information for more than 300 communities across Canada that are classified as being high-risk for flooding, noting many homeowners are essentially on their own in figuring out the risks and what kind of coverage is needed.

Researchers found that 62 per cent of available maps did not meet the basic criteria for communicating flood risk information to the public. Professor of political science Daniel Henstra, who helped conduct the research, said this could potentially cost homeowners tens-of-thousands of dollars.

“Without that information, [people] are unlikely to be buying flood insurance or to be implementing any flood protection measures,” said Henstra.

“If you think about that, when there’s a flood, disaster assistance programs will pay some of the cost of that, but we found in most cases, in the average home, you’re looking at $40,000-$50,000 out of pocket even after disaster assistance. So if there’s no insurance, people could easily be defaulting on their mortgages. A flood like this could really ruin somebody.”

There are individual measures you can take to protect yourself from damages, such as buying the appropriate insurance, but good information isn’t always easy to come by, the study suggests.

While most incidents occur during snowmelt and spring rains, flooding can happen at any time of the year. For example, there was significant flooding in Elmira in June 2017 during the warmer summer months, in that case due to heavy rainfall in the northern part of the Grand River system.

The knowledge gap is one place insurance companies can be of assistance, especially as the industry adjusts to the implication of climate change and the threat of more intense storms and weather-related damage.

Those at the brokerage level are on the front lines of increased claims and requests for information about coverage.

That’s certainly been the experience of  Steve Wagler, director of sales at Josslin Insurance, who said he sees an uptick in activity after storms such as the one in Elmira.

“Everybody needs to be considering what type of water coverage they have,” said Wagler. “That’s part of what we do as brokers, provide advice – it’s not just about buying the coverage, it’s about understanding what you have, and what you may need and then when you need to use it.”

He also recommends taking a closer look at the fine print associated with flood risk coverage – sometimes it may not cover the full amount, or even come close.

“Before you automatically renew your policy, you should take a look at some of the detail,” said Wagler. “Because a lot of times, companies will put sub-limits down. You may think you have it, but some companies may limit you to $10,000 of coverage.

“If you have serious water damage in your basement, on average, it costs just over $40,000 to repair a basement. So $10,000 wouldn’t even really cover the cleanup – people need to pay attention to it.”

Basement flooding is a significant problem area in most incidents. There is a range of different flood insurance including overland water protection, which protects when water from rivers, streams or other bodies of water flows onto dry land. Other types of coverage offered are in the case of a burst pipe, groundwater coverage, or for a sewer backup. Certain insurance companies sell all kinds of coverage in one package.

When assessing flood risk, the insurance industry looks at several factors.

“Our industry looks at it on a couple of different levels; mainly they’ll look at mapping and the vicinity to a body of water,” said Wagler. “If you’re within 100 metres of a stream, or any kind of waterway, you’re likely to have difficulty buying a product.

“Prior loss history and vicinity to water is going to determine whether you can buy it or not.”

In the meantime, more needs to be done about the lack of flood risk information in the first place, said Henstra, adding that municipal, provincial and federal governments all have a shared responsibility to provide this information.

“Whether they choose to act on the information is different, but right now, it’s not even knowable,” said Henstra. “So it’s really kind of unfair to expect property owners to be buying insurance to protect themselves when they don’t even know if they’re at risk.”

The study found that other countries Austria, Belgium, Germany, France, the U.K., all have access to better quality flood-risk information. For example in the U.K., a homeowner can get a detailed flood risk report that includes details such as times of year to expect flooding, measures to prevent it, and the type of flooding you’re vulnerable to, just by typing in the users postal code.

“And really – it’s perplexing why we don’t have these maps. It’s not really an insurmountable challenge. In Canada, we’ve got the expertise, technology, data; it’s all there,” said Henstra. “I guess we just haven’t seen the leadership yet that’s required to get a new mapping effort off the ground.”

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