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Insurance Issues

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Insurance Issues

Being unable to insure your property will devalue it and may make it almost impossible to sell because mortgages are offered on the condition that the property is insured. It also means that the cost of any flood damage and restoration will have to be funded by you. It is estimated that the damage to the average house and contents from a half metre flood lasting less than two days is £18,000.

The Environment Agency works with the Association of British Insurers (ABI) supplying them with Flood Risk Assessments for the whole of the UK so your insurer will probably know before you do whether your property is at risk.

Insurers are not Charities

We sometimes forget, wooed by their advertising telling insurance1.jpgus how wonderful they are in a crisis, that insurers are commercial organisations and will not knowingly take on risks that are not profitable for them. You cannot expect that you will automatically find flood risk insurance for your property.

Following the widespread floods of autumn 2000, when around 10,000 properties were flooded and the costs to the insurance industry exceeded £1 billion, the ABI agreed with the Government to continue to provide cover for the vast majority of households in the country provided that the government instituted a new investment programme of flood defences.

The ABI were negotiating from a position of considerable strength. The scenario of 10% of UK properties having their property insurance withdrawn and thus difficult to sell, would have resulted in a housing market crash that would have had devastating consequences for the Government of the day. John Prescott is quoted as saying that the floods in 2000 were a wake up call but we doubt whether he could sleep at all with the spectre of an imminent property market collapse in the background.

In their review of 2005 the ABI called for more investment in flood defences whilst in the same document admitting that flood and storm claims are at their lowest level for 20 years.

In November 2006 the ABI was issuing reports calling for even greater investment in East Coast Flood Defences, and whilst the Flood Advice Centre applauded their stance on greater planning controls on flood plain development the source of their research and their vested interest should be noted.

ABI Risk Categories

Insurers use three categories of flooding risk:insurance2.jpg

Low Risk

Less than 0.5% chance of a flood in any year. It is probable that insurers will be glad to offer flood protection as part of your property, business or contents insurance.

Moderate Risk

There is between 0.5 and 1.3% chance of flooding in any year. Flood cover should not be difficult to find although you may find "adjustments" to premium rates or excess values.

High Risk

Greater than 1.3% risk of flooding in any year. Insurance cover is likely to be offered on a case by case basis if at all and premiums are likely to be high reflecting the risk. Factors that will affect this are whether there are any planned improvements to local flood defences and any measures you have taken to protect your property.

Flood Defence Benefits

The insurers do recognise that, if you have taken some relatively basic flood defence measures, that this can have a dramatic impact on the risk of a claim. Measures such as vent and service closures and the fitting of drainage, door or window barriers will keep reasonable levels of flood water out of your property and prevent damage to your property’s contents.

In some cases this will result in a discount on your household insurance which will help to offset the cost of these measures.

See also you have been flooded

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