I thought it worthwhile updating customers on the flood insurance issues faced in America following Hurricane Harvey. Plus, how flood insurance currently works in the UK.
Tragically, the vast majority of homeowners in the areas devastated by Hurricane Harvey don’t have flood insurance, leaving many who escaped the storm with little financial help to rebuild their homes and lives.
In America, standard home insurance covers wind damage but not flooding. Homeowners must purchase separate flood insurance policies from a government-run Insurance Program to get flood cover. In Texas, the average cost for this plan is $500 a year, but it can rise to more than $2,000 for homes inside a floodplain. It’s not cheap.
Therefore, only around 20 percent of homeowners in the areas most directly affected by Harvey have flood insurance in place. Anyone else who loses their home will be dependent on private charity, government aid, family assistance or other independent financial assistance. Which of course means they now face the situation of being unable to rebuild their homes and replace possessions. This will affect 80% of residents.
Not a situation I find imaginable being honest. My heart goes out to the thousands of poor people affected by this terrible disaster. They are now relying on the goodwill of others and government help, which of course will take years to filter through.
What do we do in the UK?
Standard UK Home Insurance policies include flood cover. It must be made clear if flood cover is excluded, or if flood carries a significantly higher excess than normal. The normal flood excess matches the standard policy excess – usually £100. For homes previously affected by flood, or in high risk area, this can rise anywhere up to £10,000.
However, some homes were simply not insurable for flood due to previous damage or the area they are located in.
The Good News:
In April 2016 a new UK scheme was launched that means clients can insure properties at the highest risk of flood damage at a realistic price.
The scheme works by insurance companies paying into a central pot each year. Then in addition they can place the flood element of high risk properties into the fund for a fixed price based on the council tax band of the property.
The fund then allows the insurer to claim against it should a flood claim be submitted. The insurer still deals with the policyholder as if they had insured flood themselves. This means that houses in high risk areas can now get flood cover at a reasonable price, with a sensible level of excess.
Some exclusions apply of course:
- All Homes built after 1st January 2009 (to stop developers building homes on flood plains)
- Commercial properties including commercial leasehold properties
- Leasehold blocks with more than three units or where the freeholder does not reside in the block
Call Keith on 01225 701712 to discuss flood insurance and any issues you may have faced on your own property. We are well versed in helping customers out with the various aspects of flooding and insuring your property.