Guide to Flood Insurance
If there is one thing we can bank on, it’s the unpredictability of the British weather. With that unpredictability comes the occasional risk of such torrential downpours that rivers burst their banks and sea defences are breached – the result is flooding in various parts of the country
Floods might not be a regular occurrence, but when they do occur the damage they cause to buildings and their contents may be considerable.
So considerable, in fact, that the BBC reported a flood damage claims bill faced by property insurers after the last major incidents – in the winter of 2015 and 2016 – in excess of £1.5 billion.
To make matters worse, this bill follows hot on the heels of similarly severe storms and flooding in the years 2005, 2009, 2012. The cost of settling the inevitable spate of flood insurance claims which follow need to be met by the reserves built up by insurers from the premiums they charge. The end result is that flood insurance becomes more expensive for everyone.
What is all this likely to mean for the average cost of flood insurance on your own property and the nature and scope of the insurance arranged?
The difficulty in getting an affordable flood insurance quote
Your claims history and the assessed risk of your property being affected by a flood of course varies from one area to another.
If you were unfortunate enough to have suffered the effects of flooding in any of these years, and had to make an insurance claim, or if your property is situated in an area defined as high risk to flooding, an affordable flood insurance quote may be hard to find – the average cost of high risk flood insurance is still higher than normal and any notion of finding cheap flood insurance might seem like just a pipedream.
This might be the case if you live in an area defined as high risk by the Environment Agency – a definition you are able to check for yourself by visiting the Agency’s website and simply entering the postcode for the property you own. Areas are then classified as high risk, medium risk, low risk or very low risk. A map also shows how your property fares in relation to other parts of the district in question, but indicates that as many as 5.5 million homes may be at some degree of risk from flooding.
Even if your property is in the highest risk category, however, there is a solution which is likely to lead towards more affordable flood insurance quotes.
What is Flood Re?
That solution lies in a re-insurance scheme called Flood Re – which works in the background, so you might not even know that it’s there.
Flood Re came into existence in April 2016 – in the wake of a series of major floods, extensive damage to peoples’ homes, and a raft of expensive insurance settlements that led to swingeing increases in flood insurance premiums, especially of course for those home owners in high risk areas.
Flood Re was set up following a joint initiative by the government and the insurance industry generally to bring affordable insurance back within the grasp of all home owners, whatever the risk of flooding in the area in which they live.
Participating insurers pay a moderate premium for the reinsurance of a property in a high risk area and this effectively underwrites the risk covered on the insured customer’s property – so allowing the insurer to offer flood insurance at a reduced premium.
The reinsurance scheme operates entirely between the insurer and Flood Re, leaving completely undisturbed the individual home owner’s relationship with any insurance broker or insurance company, so you as the customer never need any direct contact with Flood Re itself.
You still have the ability to build up any normal no claims discount offered by your insurer and, if you want to lower the cost of premiums you may still opt to take a greater proportion of the risks by accepting an additional excess on the flood insurance element of your building and contents insurance.
What the insurer’s relationship with Flood Re does do, however, is to grant the insurer the confidence and the ability to reduce the cost of the premiums it needs to charge its customers.
How much does flood insurance cost?
As already mentioned, the cost of flood insurance depends on just where your property is situated – specifically, whether it is a high or low flood risk area.
Just as the Environment Agency’s risk assessment service responds to the postcode used to identify your property, so it is possible to adopt the concept of a flood risk insurance postcode.
As also mentioned, choosing to accept a higher excess may also help to reduce the cost of your flood insurance premiums. Though you may find that if you have previously claimed for flood damage, your existing property insurer may insist you pay a higher excess anyway.
As with many other forms of general insurance, the more you do to mitigate the risk of loss or damage, the more favourably is your insurer likely to set your insurance premiums. The same holds true for flood insurance and there is a range of steps you might take to mitigate the risks:
there are a number of products on the market designed to reduce the damage likely to be caused if flooding encroaches upon your property – specially treated floor boards, for example, air brick covers and putting furniture and appliances on plinths to raise them above flood waters;
the website Know Your Flood Risk, publishes a useful guide, including an infographic about the steps you might take to reduce damage in the event of flooding;
sign up for automatic flood warnings from the Environment Agency;
join your local flood action group – if there is one, and if not, consider forming it;
involve yourself in any lobbying and public consultations – with your local council, for example – that might be held to improve your local flood defences;
apply to the local office of the Environment Agency for an “insurance-related request letter”, which details any planned works to improve flood defences in your area, gives information about past incidents of flooding and indicated when the last National Flood Risk Assessment was performed;
for the most detailed assessment of your property’s flood risk, you might choose to commission a formal, professionally conducted “property-level” risk assessment, normally made by an architect, engineer or surveyor on the basis of established national standards.
These are just some of the facts you might want to assemble when negotiating with your insurer about the steps you have taken to mitigate the risk of flooding – with a view to reducing the cost of your flood insurance premiums.
Beware, however, that your investigations might unearth risks which you might have preferred to have remained hidden. Once you know about them, they become “material facts” which you are obliged to declare to your insurer. If you fail to do so, the insurer may be entitled to reject any claim which you subsequently make.
This applies equally to the typically more affordable flood insurance policy that is backed by the insurer’s protection of Flood Re.
What does flood insurance cover?
You may need flood insurance cover for a whole range of different types of property you own – the home you bought as an owner occupier, a holiday or second home, buy to let property that you own as a landlord, or any of these types of property which are presently, or are likely to become, unoccupied.
The cover is designed to protect you from, and compensate you for, any loss or damage caused either to the building you own or its contents. Cover typically includes those elements identified by the government-backed Money Advice Service:
the costs of removing flood-related debris;
the costs associated with the – often lengthy – process of drying out, repairing or reinstating the structure of the building and its fixtures and fittings;
the repair or reinstatement of damaged possessions, including your furniture and furnishings – depending on the policy you choose, replacements may be made on a new for old basis or after the deduction of an amount for wear and tear of the damaged items;
the cost of alternative accommodation, or loss of rental income, for the duration of that period whilst your property remains impossible for you or your tenants to live in – the maximum level of compensation may be up to a fixed amount or represent a percentage of the total sum insured; and
any professional fees associated with the process of rehabilitating your property – architects, engineers, surveyors or solicitors, for example.
Although this is by no means an exhaustive guide to flood insurance, it may help to explain the very real benefits we are now able to offer here at UKinsuranceNET thanks to our inclusion of a number of our property insurance policies with flood cover that is backed and supported by the Flood Re programme.
For a whole range of property owners in high risk areas, these policies may offer not only suitable flood protection, but do so at an affordable cost.
Support provided by Flood Re works entirely behind the scenes, so that you never have to have direct contact with the re-insurer, but continue your normal, customary relationship with your insurance broker and your insurer – even in the event of your needing to make a claim for flood damage.