The Royal Institution of Chartered Surveyors warns that if you can’t get insurance for your home, you’re in big trouble. Mortgage lenders will not lend on homes that are not insurable, and their value could drop by as much as 80% as a result.
It is a high risk of flooding that is likely to make your home uninsurable. According to a recent survey, 6.5 million homes are already at risk of flooding, of which 1.5 million are in high-risk areas. The government has completed flood defenses in many of those areas and another 80,000 homes are due to be protected this year. But concerns have also been raised about a further 120,000 new homes planned for Thames Gateway potentially being in a high “risk” area. However, many areas remain vulnerable. And if global warming continues, by 2030, the 1.5 million at risk could become 3.5 million. In 2003, the Association of British Insurers (ABI) agreed principles committing UK insurers to offer home and contents insurance for properties in areas assessed as flood risk once every seventy-five years or more. The rider was that the flood defenses had to already be in place or they would be completed by the end of 2007.
The Department for Environment, Food and Rural Affairs (DEFRA) has responsibility for developing and maintaining these flood defences, but within the insurance industry there is widespread concern that not enough progress is being made. As a result, insurers have warned the government that there could be a widespread withdrawal of insurance coverage if progress intensifies.
Meanwhile, people living in flood-threatened areas could find their insurance premiums skyrocketing. While the insurance industry agreed to provide insurance coverage, their commitment was simply to keep premiums at “reasonable” levels. But there was no definition of what “reasonable” means. As a result, premium increases of 60% have been common with increases of up to 400% in bad areas. In a small number of cases, coverage has been withdrawn entirely, mainly in rural areas where DEFRA considers the cost of defending a group of a few houses to be uneconomical.
Environmentalists warn that unless DEFRA is put in place, the UK’s current bill for flood damage could rise from £950m a year to £3.2bn. After all, the average insurance claim for home flood damage is £30,000, even more than fire damage. And localized events like the 2004 flood in Boscastle, Cornwall, can cost insurers in excess of £15m.
If you are in any doubt as to whether your home or proposed home is in a flood hazard area, you should visit http://www.environment-agency.gov.uk. This is the DEFRA website where you can check if they think your home is at risk of flooding. Their maps were originally designed for planning purposes and provide information based on zip code.
While many insurers use DEFRA data, others, such as More Than, have their own flood maps. These rate individual homes rather than by zip code areas. This means that if your existing insurer increases your flood risk premium and uses DEFRA data, you may still be able to get a cheaper rate from an insurer that uses its own flood data if your data identifies that your property is more beyond the “risk”. ” zone.
The ABI recently joined the pressure on DEFRA to speed up the construction and improvement of flood defences. He has warned that unless the government increases its spending on flood defenses, the insurance industry may not continue its commitment to the 2003 principles.
That would be bad news for many homeowners.
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