Climate change in Canada
The June 2013 Alberta flooding was a loud wake-up call for many Albertans. Our climate is changing, and Mother Nature let us hear her roar that day. The floods took the lives of four Albertans, displaced thousands of people, and cost the economy a whopping 4.7 Billion dollars. If we zoom out a bit and examine the Alberta flooding on a global scale, the flood was ranked number three most costly natural disaster in 2013 behind the Eastern European floods-16.5 billion in losses, and the European hailstorms totally 4.8 billion in economic costs. In Canada alone, from 2006-2012, the costs of insurance damage from extreme weather related claims have increased by 650%! That does not even include the June 2013 flooding.
How claims effect your rates
What do these numbers mean to you, and why should you care? Whether or not you were affected by the Alberta floods, you will see the impact on both your insurance coverage and insurance premium costs. Overland flooding is an exclusion on your policy; always was and probably always will be. The reason is simple, it costs too much money. Think about it, insurance companies in Alberta paid out 1.9 billion in flood-related claims, most of those for sewer backup. Where do these 1.9 billion dollars come from? Well, it comes from you. Insurance, from its very inception is this: the loss of the few covered by the many. Simple, right? Well, what happens when the loss is the many? It means your premiums must increase regardless of whether or not you had a claim. In other words, insurance is a large pool that every policy holder contributes to; if someone has a loss, money comes out of this pool. If the pool is drained too fast, then people have to put in more money to ensure there is enough to cover future losses.
Sewer backup coverage
Sewer backup coverages are changing in order to reduce the amount of large claims made on insurance policies. Make sure you are covered properly by checking your policy carefully for two things: your sewer backup limits which can range from $15,000 to $100,000. Many insurance companies have reduced the maximum payouts for sewer backup claims, so check to see if yours have been affected by this. The second important change is your deductible. Common deductibles for sewer backup used to be $500 or $1000, but companies are now implementing deductibles as high as $2500.
Why are these changes happening? Well, let’s discuss the most obvious reason first, money. Insurance companies are doing their best to cope with the climate change and the demands it’s putting on insurance claims. Limiting small claims, or even capping claim limits will obviously reduce the payout amount but it will also help to keep your own home insurance rates from increasing too much over the next few years. Sewer back up claim payouts per occurrence is increasing a lot. Basements are developed, really developed. Hundreds of thousands of dollars can go into creating a fully developed basement equipped with home gym or theatre. What once could have been a $20,000 payout for a sewer backup claim can total up to $150,000! Some words of advice: read over your sewer back up coverage carefully and always read over the exclusions outlined in your policy.
Overland Flood Insurance
Our climate is changing and flooding is a reality of that change. Will we experience a flood of that scale again? Possibly, no one can say for sure when. What we do know for sure is that most insurance companies are not going to pay. Clearer-written exclusions on policies and changes to sewer backup coverage will limit sewer backup claims due to overland flooding. Flooding can also be caused by melting snow, rainwater, and other factors. Flooding is a frequent occurrence in the Prairie Provinces so it’s important to know how to protect your home and how to prevent a loss from happening. For more information, see our blog post on “What to do in a flood emergency.”
Aviva Insurance is offering the first ever Overland water coverage in Canada. What does this mean? It means with this enhancement you will have coverage for water damage due to rising freshwater levels, water damage caused by melting snow and ice, and damage due to torrential rain. For more information on this groundbreaking coverage, please visit: www.floodinsurance.ca
Tell us what you think about flood insurance. Leave a comment below and let us know if you would purchase extra coverage for flood insurance. Insurance should meet the needs of our clients, and not the other way around. We want your feedback!