2010 flooding in the Bella Coola Valley was unprecedented and resulted in multiple homes and businesses qualifying for Disaster Financial Assistance from the province (Ministry of Transportation and Infrastructure photo)

Overland flood insurance may exclude some homeowners from DFA

Spring flooding has not been a problem (yet) but 2017 fall flooding meant the area qualifed for DFA

New offers of residential overland flood insurance in B.C. could exclude some homeowners from Disaster Financial Assistance (DFA) if they refuse the coverage.

Spring flooding has already wreaked havoc across southeastern B.C. this year, especially in the Kootenay-Boundary Regional District. During the peak of the flood around 1,600 properties in the regional district were on evacuation order.

The downtown core of Grand Forks was hit particularly hard. Floodwaters from both the Granby and Kettle Rivers meant that most businesses located in the town centre were unable keep water out. The last time water was even close to that high was 1948.

So far, Bella Coola has escaped spring flooding. However, fall floods in 2017 impacted several homeowners in the Valley and prompted the area to qualify for DFA.

For flood victims in BC the provincial DFA program will pay victims of flooding and other natural disasters up to $300,000 for uninsurable losses.

However, due to recent flood insurance changes in BC, some victims could miss out.

The change came a few years ago when Canadian insurance companies started to offer overland flood insurance, according to a CBC report. Before that, most insurers did not cover damages resulting from water originating outside a home, such as a flooding river or storm surge, which meant almost everybody could apply for disaster assistance.

Overland flood insurance is an optional purchase and is now available to about 90 percent of homeowners across Canada. Only those who live in the most perilous flood-prone areas are denied the coverage, Insurance Bureau of Canada spokesman Aaron Sutherland told CBC.

The potential problem arises for those who are eligible for overland flood insurance but choose not to buy it. Emergency Management BC (EMBC) has warned those homeowners will no longer be eligible for DFA after a flood.

A 2016 statement from EMBC said: “If a flooding disaster occurs and DFA is authorized for a disaster event, an applicant who could reasonably and readily have purchased overland flood insurance would not be eligible for DFA.”

So what does this mean for homeowners who currently do not have overland flood insurance? And what does it mean for insurance to be “readily available?”

For EMBC, it means a person could obtain overland flood insurance from a local agent or broker, but “reasonably available” should not be confused with affordable.

“EMBC does not consider affordability when determining if insurance was reasonably and readily available,” the ministry said. “What is important is that the price of the insurance was reasonable considering the risk.”

Based on their experience to date, EMBC says that “insurance companies do not offer flood insurance in high-risk locations because the premiums would be prohibitively expensive. Under EMBC’s existing criteria, someone in a high-risk area who could not get flood coverage could be eligible for DFA, provided they met the other eligibility criteria.”

EMBC consults with the Insurance Bureau of Canada (IBC) to determine if flood insurance is readily available in an area for which DFA has been authorized. “To date, flood insurance has been available in every community except for specific high-risk areas,” the provincial ministry reported.

Johanna Morrow, manager of the recovery and funding program at EMBC said she’s consulting with the Insurance Bureau of Canada to figure out the availability of overland flood insurance.

“Their insurance broker would have to have said to them: ‘You can get overland flood insurance,’ and they would have had to have said: ‘No thanks.’ Then, we would have to look at that quite closely to see if they fit within the eligibility,” Morrow commented.

She added that homeowners applying for DFA should ask their insurance brokers to fill out a form on the EMBC website, to verify whether overland flood was available or not. In the meantime, Morrow advises homeowners to continue applying for DFA.

“We’re taking a very flexible approach, because the insurance is quite new, and it’s not widely available across the province,” she said. “We don’t expect people to switch their insurance company to get the coverage. The goal of our program is to provide as much help as we can. So, we’re not looking for ways to deny people. We’re looking for ways to approve them.”

“At this time, EMBC also does not expect a person to change insurance companies solely to obtain flood coverage,” the ministry said, adding that it will “continue to assess each individual DFA applicant by applying its existing legislative criteria in a fair and consistent way.”

With files from Insurance Business Magazine

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