The Complete Guide to Protecting Your Home with Flood Insurance

Flood damage in a child’s bedroom

The increasing frequency and rising damages caused by flooding in Canada is a major concern for homeowners. What used to be “once in a century” floods are happening far more frequently, and homeowners want to make sure that they are protected.

Flood damage can happen almost anywhere in Canada, including urban areas where flood zones are expanding. Pluvial flooding (such as sewer backups) is a significant risk as municipal infrastructure can quickly become overwhelmed by frequent and large storms.

Despite the increased risks, many Canadians don’t have flood insurance. Many may not even be aware that they are covered because it is not commonly included in most average home insurance policies.

If flood insurance is available in your area, getting coverage can help you rebuild should a flood happen and cause damage to your home.

What Is Flood Insurance?

Flood insurance covers damage that is the result of externally-caused and natural flooding. This is damage that is the result of:

  • Heavy rains
  • Melting snow
  • Overflowing storm drains
  • Overland flooding, such as when a river overflows its banks

This is not the same as insurance for water damage such as burst pipes, appliance malfunction, or a leaking roof. People commonly use the term “flood” to talk about water whenever it is somewhere it should not be. But an overflowing dishwasher or toilet is not considered a flood by the insurance company.

The good news is that water damage is more likely to be included as part of your standard home insurance policy, but the difference can be frustrating if you assumed you had coverage for a sewer backup or overland flooding and your carrier denies the claim. It is critical that homeowners have the right type of insurance.

How Does Flood Insurance Work?

There are three parts to flood insurance coverage: Structure (or Dwelling), Contents, and Additional Living Expenses. These three parts should cover the major expenses you will face after a flood.

Structure: This part of your policy will help cover the costs of cleaning up the damage and making necessary repairs. Floodwater may be contaminated with sewage and pollutants, and professional cleaning is a necessity. There may also be damage to your floors, drywall, or foundation. Other structural elements may need to be replaced outright. Shifting earth can cause serious foundation damage, ruptured pipes, cracks, or even leave foundations off-kilter.

When it comes to flooring, carpets will have to be removed. Hardwood flooring may be salvageable, but even if it can be properly cleaned, boards can still expand. Even salvageable flooring may have to be removed to dry out the subflooring. There is a chance that there is water damage to the structure that you cannot see, as it lies within the cavities of the walls or underneath the flooring. You may need further experts to inspect these possible damages.

Insulation can also wind up soaked through, framing can swell, and there can also be damage to plumbing and electrical systems. Given the extent of the damage that flooding can do, the costs can be extensive depending on what happens.

Contents: The other major source of cost is contaminated belongings. Appliances that use any type of insulation, such as refrigerators and ovens, are unlikely to be salvageable. Other appliances may need to be replaced if they have been contaminated and cannot be salvaged.

Furniture is a likely candidate for mould growth after substantial water damage, and much of it will have to be replaced outright. Upholstered furniture, mattresses, carpets, and curtains that have been soaked in contaminated water will have to be thrown out. Particle-board furniture will also likely disintegrate. While solid wood and metal can be cleaned, there will still be expensive restoration costs.

The restoration of contents includes both the cost to replace belongings and attempts to salvage and/or clean your belongings. It is worth noting that an unsuccessful attempt to salvage belongings might still come out of your insurance settlement.

Additional Living Expenses: In the aftermath of a flood, there are health risks to being in your home. Mould and contamination can make spending time there hazardous, and you may need to live elsewhere while repairs are done on your home.

Additional Living Expenses will cover costs such as renting a house or condo while your home is repaired, added gas and transportation costs from a longer commute, and even the added cost of takeout you might incur while staying in a hotel immediately after the flood.

A flooded street in an urban area

Flood Risks Across Canada

Flood risks are present almost everywhere in the country. In the West, widespread flooding in British Columbia became one of the most devastating climate events of 2021 across the world, while 2013 saw billions in property damage and financial loss when flooding struck Calgary.

Manitoba is one of the country’s most flood-prone areas, as the Red River has been the source of some of Canada’s biggest flooding events.

In Ontario and Quebec, overflowing rivers are a common source of flooding, while in urban centres like Toronto, storms and rapid, heavy rainfall can quickly overwhelm storm drains and infrastructure. In older parts of the city, storm sewers and waste sewers are combined, and this can lead to sewer backup damage in older neighbourhoods. If heavy precipitation events lead to a sewer backup in your home, you may want to consider the help of a property damage lawyer in Toronto to deal with the insurance claim.

In the Maritimes, extreme weather plays an important factor in flooding events. In addition to river basin flooding, hurricanes and tropical storms have a history of causing damage.

How to Get Flood Insurance

In Canada, home flood insurance is relatively new. The first policy was only introduced in 2015, and there are many homeowners who do not have it because it is so new or they do not believe they live in a risk-prone area. As flood risks have increased recently, more insurance companies have introduced this type of coverage, and it may be worth looking into, even if you believe you live in a low-risk area.

In many Canadian municipalities, flood zones are predicted to increase in size over the next several decades, and millions more Canadians may find themselves living in flood zones compared to today.

How Much Flood Insurance Do I Need?

The amount of flood insurance you need depends on your home, the risks in your area, and how much you can afford to replace without the insurance company’s help.

There are two types of flood insurance coverage that you should be able to add to your home insurance policy:

Sewer backup coverage: Sewer backup damage is a common problem when municipal infrastructure is overwhelmed by intense rain combined with obstructions in the system. A blockage in the main sewage line can cause wastewater to flow in the opposite direction, allowing it to flow up out of toilets. Sewer backups can be very costly to clean up.

Overland flood coverage: Overland flood coverage is protection from overflowing bodies of water, such as a river, lake, or even a local creek. Heavy rainfall, melting snow, and ice dams can all lead to a body of water overflowing. Even if you do not live close to a river or a lake, you may want to look into the possible presence of buried creeks that can have the potential to flood.

How much coverage you need depends on the value of your home and belongings. Keep in mind when you are getting quotes for policies that your policy does not have to match the sale value of your home. It is the cost to repair or rebuild the house that should be reflected by the limits in your policy. You may want to research available restoration or construction costs to ensure that you are properly insured.

Another important consideration is the deductible. How much can you afford to pay before the insurance kicks in? The deductible is the amount the insurance company expects you to pay before it pitches in. Choosing a lower deductible typically leads to higher premiums. If you choose a higher deductible to save money on your monthly costs, consider putting some of it into an emergency fund.

The other factor is policy limits, the maximum amount the insurance company will pay out when you have to make a claim. Policies may even establish separate limits for different parts of the claim, such as valuables.

Renter calls flood insurance carrier due to leaking roof

Flood Insurance for Renters

It is not just homeowners who should look into flood insurance coverage. Renters should also look into getting coverage for flooding. It is a common misconception, but the landlord’s insurance will not cover your expenses in the case of a flood. Without your own policy, you will be out-of-pocket when it comes to replacing damaged belongings and finding somewhere else to live.

A tenant insurance policy covers Contents and Additional Living Expenses (“ALE”). ALE coverage will help you cover the costs of getting a hotel room and a short-term rental while you wait for repairs to be completed so you can move back in.

The property owner’s insurance will only cover repairs to the physical building, as well as any of their own belongings. If you rent in an area that could be prone to flooding, consider optional flood coverage, or you could wind up facing steep expenses. Basement apartments are especially vulnerable to flood damage, and there is often nowhere you can put your belongings to protect them from water damage.

Insurance Coverage for Businesses

Flood insurance coverage isn’t just for homeowners. Businesses in communities affected by extreme weather also need protection. After a fire or flood affects your business, you can wind up unable to operate for weeks or even months as you rebuild, and your income can be affected for even longer if the surrounding community will also take time to recover.

Business insurance helps business owners clean up, rebuild, and replace damaged inventory and equipment. It can also protect lost business income. Even if a business can replace lost equipment, supplies, and product, without any revenue, many enterprises cannot keep up with their debt payments and may wind up in bankruptcy.

Business income insurance replaces lost business income until you are operational. Extended coverage can also supplement income as you re-establish your customer base and clientele, which can be especially important in communities that have been widely impacted by a natural disaster.

What If You Can’t Get Flood Insurance?

Even as insurers make flood insurance more widely available, approximately 10% of homes cannot be insured due to the extreme likelihood of future floods. Insurance companies avoid providing policies in areas where risks are high enough that they can expect repeated or major claims. Because Canada does not have a national flood insurance program, your options could be limited if you live in one of these areas.

If you discover that your insurance company does not offer flood insurance in your area, you may want to consider your alternatives, as there may be another company offering coverage. A good example is insurance in coastal areas, where storm surges can cause extensive damage. It is not common among Canadian insurance carriers and may limited availability.

As flood risks increase, there have been some cases where homeowners have been unable to renew their mortgages without flood insurance. While home insurance is not legally mandatory the way auto insurance is, most mortgage lenders require borrowers to get insurance. If a homeowner cannot get flood insurance coverage after it has been shown that they live in a flood-prone area, the mortgage company may decline to renew with them.

Water damage from basement flooding

Who Can Help with a Flood Damage Claim?

Learning how to make a flood insurance claim can be overwhelming. You may have had to deal with an evacuation order or lost the use of your home until repairs can be completed, all while you are dealing with the stress of the damage and loss.

When you file an insurance claim for a substantial amount of money, it may make sense to hire someone to help you through the process. The insurance company will send an insurance adjuster to review your claim, but it is important to remember that this person works for the insurance company, and is therefore not an impartial party considering the best interests of each party.

You have the option of hiring a public adjuster or an insurance lawyer who represents your interests when negotiating with the insurance company. They will help walk you through the details of your insurance policy and help navigate each step of your claim. They can make sure you keep an open line of communication with the insurance company and make sure you know your own rights and responsibilities when dealing with them. They will assist you with the paperwork and help negotiate and/or advocate for your rights if the insurer undervalues your claim or pushes you to move too quickly.

Flood insurance coverage is worth looking into if you don’t have it already. Flood risks are rising in Canada, and it is not something included in most basic home insurance policies.