Home Insurance with Flood Risk

Published 29th December, 2006.

There are around 400,000 homes in the UK today that fall into the category of "Very High Flood Risk", and with global warming set to continue this figure is likely to rise. We decided to take a look at what the insurance implications were for people that owned property in high flood risk areas, and see if it was at all possible to own a house that could be classed as uninsurable.

Fortunately, the current situation for owners with homes in flood risk areas is that they can get the insurance cover they need, but this relies solely upon an agreement that the ABI (Association of British Insurers) has made with their associated members.

In 2003, the ABI and their member companies, agreed to continue offering home insurance for properties and businesses located in many of the UK's flood risk areas. This, however, remains dependent upon DEFRA (Department of Environment, Food and Rural Affairs) maintaining their ongoing development of flood defence projects and their continued support for future developments. Although progress is slow, the number of homes successfully protected from rising flood waters increases each year, with a further 80,000 added in 2006 alone. Despite these results, insurance companies still remain nervous of the task ahead and the lack of speed at which all these projects can be completed.

However, for the time being at least, all insurance companies under the umbrella of the ABI have committed themselves to offering home insurance to the thousands of owners with property in flood risk areas. How long this will last rests almost exclusively upon the completion of current projects and the ones penciled in for the future, because if any were to stall or be cancelled it could make for an entirely different story. This commitment, however, has made it possible for owners to still receive reasonably competitive insurance quotes from many of the most popular home insurance companies in the UK. The premiums for these vulnerable homes, however, will reflect the varying degree of risk attached to each property, therefore quotes are likely to differ depending on how each insurer interprets those risks.

Calculating Flood Risk Insurance Premiums

When calculating their premiums, home insurance companies have to factor in all the risks attached to a particular house, and if it is located in an area susceptible to flooding then this extra element of risk must also be included. This is the main reason why insurance costs for these properties are more expensive, as insurers have to counter balance the increased likelihood the policyholder will make a claim. To get a better understanding of the flood risk attached to a particular home, insurance companies refer to a flood map that was originally devised by the Environment Agency. This map puts homes into one of the following three categories:

Low – 1 in 200 chance or less of flooding each year.

Moderate – 1 in 75 chance or less of flooding each year.

Significant - Greater than 1 in 75 chance of flooding each year.

Any homeowner with a property classed as low or medium risk should find no problem in receiving a home insurance quote.

Other Factors Considered

Whenever possible, insurance companies use a combination of data to get a better overall picture of the risk attached to a certain area, as some places will have projects underway while others may have them planned for the future. If this is the case, it will have a tangible affect upon homes in that area and possibly make them all a little more insurance friendly. There are, however, some places that do not have any plans proposed and it these areas that are of greatest concern to the insurers. In places like this you might find that home owners are advised by the insurance companies to reduce the flood risk as much as possible themselves. There are products on the market specifically designed to protect a home from flood water, and to lessen the risk a property owner may be requested to install some of these, and by doing so put themselves back in a position whereby they can get the home insurance cover they need.

Unfortunately, homes that are classified as significant risk will not be guaranteed cover from any of the insurance companies. This does not necessarily make the property uninsurable, but it might mean that there's very little in the way of choice.

Why One Quote is Never Enough

As with any type of insurance it's always advisable to get more than one quote with which to compare. This is especially important when looking for insurance cover for a home in a flood risk area. The data used by many insurance companies to calculate their premiums will often attach a flood risk to an entire postcode, even if some of the properties in the area could be deemed low risk. This means that all homes in that area are afflicted with a high risk status, and many will end up paying over the odds for their home insurance. So by getting various quotes there's a better chance of finding an insurance company that uses data from various sources when calculating their premiums. Some insurers combine their own information with data taken from the flood map to get a better understanding. When this happens home insurance quotes will reflect the risk attached with more accuracy, and in some cases this will mean the policy is cheaper.

Compare Home Insurance Quotes Here

Note - This article is only a journalistic interpretation of the current situation regarding flood risk homes. We have endeavoured to make it as accurate as possible following our own indepth research, however since this article was published the situation may now have changed. It is intended as general information only and as a springboard for further research. For specific questions regarding flood property it's always advisable to seek the advice of a qualified professional.