Home Insurance

30% of Canadian homeowners unaware they must pay extra for flood and earthquake insurance

By: Michelle Bates on April 27, 2022
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Major weather events have become more and more prevalent in Canada, and they’re not forecasted to let up any time soon. As we enter flood season and brave the effects of climate change, we’ll continue to face extreme weather conditions. And if the Calgary, Alta. hailstorm and British Columbia floods of 2021 were any indicator of what we’re likely to see this year, homeowners should be aware of the impact these conditions can have on their property.

In an effort to determine whether Canadians have the proper home insurance coverage in place to combat unpredictable water and weather damage, we surveyed* homeowners about the weather-related home insurance endorsements they’ve added to their policies in the past year. With water damage on the rise, more Canadians may need to rethink their policy coverage — before more damage is done in 2022.

30% of respondents unaware flooding and earthquake coverage aren’t part of standard home insurance

Among those surveyed, 30% thought flooding and earthquake coverage were included in their standard home insurance coverage. But that’s not the case. These are endorsements, or add-ons, that you can purchase — depending on where you live.

According to the survey results:

  • 21% added on internal water damage (sewer backup) coverage

  • 9% added external water damage (overland flooding) coverage

  • 8% added earthquake damage coverage

Some homeowners came close to adding flood insurance or earthquake coverage to their policy, but either didn’t follow through or were declined these add-on coverages, possibly because they live in an area deemed too high risk.

  • 29% considered add-on insurance, but did not add it

  • 4% inquired about climate-related endorsements but were declined by their insurance provider

As flood damage repair costs rise and climate change continues to cause a higher frequency of flooding, the IBC and the Government of Canada are set to introduce proposals this year for a low-cost national flood insurance program for those homes at a higher risk of flooding.

As it turns out, many Canadians don’t seem prepared for extreme weather damage. A 2020 Partners for Action survey, which polled 2,500 Canadians living in flood-designated areas, found, only 6% actually knew they were at risk, 47% were not concerned about flooding, and 57% didn’t have flood insurance.

Does your home insurance policy protect against extreme weather?

Though your base home insurance policy likely covers wind, ice, and fire damage (not including vehicle damage), overland flooding, sewer backup, and earthquake coverage require an insurance add-on.

If you don’t already have added coverage in place to accommodate your risk of flood and natural disasters, now may be the year to do so.

“In the last 10 years, water has become a more prominent fixture in the risk outlook for Canadian properties, but it’s one of the more fragmented parts of property insurance,” says Steven Harris, licensed insurance broker and LowestRates.ca expert.

“If your home floods because a branch crashed through your window in a windstorm, that will be covered under standard insurance, but overland flooding, such as from ice thaw, is not.”

The coverage you receive may vary from company to company, so it’s best to compare home insurance policies and rates across many providers to get the best value for your needs.

IBC estimates one in 10 Canadian homes at risk of flooding in the next 20 years

According to the Insurance Bureau of Canada (IBC), around 10% of private residences in Canada are at high risk of flooding. Knowing this, it may come as a surprise that overland flood insurance only became available in Canada in 2015 after a major flooding event in Alberta in 2013.

However, the need for added water damage protection is only increasing — and quickly. The IBC named 2021 the sixth most costly year for insured property damage due to extreme weather in Canadian history, totalling $2.1 billion.

Because of increasing flood concerns, the IBC recommends preparing for flood season as early as March. Assembling an emergency supply kit, removing valuable items from the basement, and shutting off the electricity in areas of the home that may be susceptible to flooding can help mitigate the effects of a flood.

Beefing up your insurance policy to guard against extreme weather damage is even more crucial for financial protection when you need it most.

“You don’t want to be caught off-guard during an already-stressful time after your home floods,” says Harris. “Check your policy now.”

*Survey conducted using Google Surveys by LowestRates.ca and polled 544 Canadian homeowners between Mar. 12-15, using Google’s online panel. This probability sample of 544 respondents has a confidence level of 95% and a confidence interval of ±5%.

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