What is flood insurance?

Nov 05

For some parts of the UK, a glorious summer ended with a bang when the first of the year’s flood warnings was issued by the Met Office, reported the Telegraph newspaper on the 13th of August 2018.

It goes to show that floods may hit the UK at practically any time of the year, bringing with them the heartache of damaged homes and the inevitable insurance claims that follow. Following the flooding caused by especially wet weather, as many as 8,000 homes may be affected and up to £400 million worth of damaged caused, according to the Association of British Insurers (ABI).

Flood insurance – typically a component of standard home building and contents insurance – is the product designed to compensate property owners for the loss and damage caused by flooding. That loss and damage may be extensive, costing many thousands of pounds to repair. In the wake of the storms and flooding of 2015-2016, the Environment Agency revealed that the average insurance claim by homeowners affected by floodwater was £50,000.

In the wake of especially severe events, however, the escalation in the number and value of flood insurance claims has two main effects:

  • property insurance premiums go up – because insurers need to cover the eventuality of claims by the income they receive from premiums; and
  • property owners who have experienced flooding in the past, or whose buildings are situated in areas known to be at risk from flooding, experience difficulty in securing flood insurance at all – as insurers grow increasingly wary of the risks associated with such properties.

Flood insurance premiums

Recognising the difficulties encountered by many homeowners facing increased flood insurance premiums, the government and the insurance industry together formulated a reinsurance scheme called Flood Re, which came into being in 2016.

Participating insurers paid a reinsurance premium to Flood Re, which supported claims subsequently made by homeowners, so that insurers are able to reduce the cost of home insurance premiums.

On the 4th of October 2018, property insurers UKinsuranceNET revealed that there was good news in store for many homeowners with property in flood-affected areas because Flood Re has announced that it is reducing the cost of the reinsurance premiums participating insurers need to pay.

It is hoped this saving will be passed on to consumers. It is likely, however, to be affected, of course, by the flood claims arising from severe events and the claims which follow in the coming years.

Finding flood insurance

The efforts of government, the insurance industry and the support of Flood Re are helping homeowners secure the flood insurance they need.

Nevertheless, if your property has been subject to flooding in the past or is in an area known to be vulnerable to flooding in the future, you may still encounter problems in finding an insurer prepared to offer this essential element of home protection.

But there are home insurance providers who specialise in flood insurance – even for those homeowners who may have found it difficult to arrange such cover in the past. So, if you are looking for flood insurance to keep your home safe from all that this coming winter might throw at it, consult such a specialist provider now.