Some 1,200 homeowners in the Ottawa-Gatineau area are facing costly repairs if not outright reconstruction in the wake of this year’s record flooding.
Other areas across the region and the country have fought their own battles against rising waters. I always find the flooding issue interesting, because people don’t generally give it much thought until they’re really wet.
But insurance companies are giving it a lot of thought. They are growing increasingly concerned about the high costs of claims from water damage.
Premiums are on the rise and a growing number of insurers will not sell coverage for certain kinds of water events. This is an issue that should concern any property owner in or near a flood zone, be they residential or commercial.
One of our staff suffered water damage in their basement earlier this month; not from “overland water” (for which they were not covered), but from a rising water table. Rising ground water found its way through cracks in the floor and foundation of the house.
Luckily, their existing policy covered this event, but I know from the experience of others the insurance company in question might remove this sort of coverage from future renewals.
The luxury of living with flood risk
It’s interesting how in this country, where we have such an expansive geography, we choose to live in floodplains because of the picturesque appeal of being close to water. We consider it a luxury, something that commands a premium price.
Contrast this with overcrowded countries like Bangladesh, where dense development in a flood plain is a matter of necessity, with often tragic consequences during extreme weather events such as monsoons.
If you chose to live in a floodplain, sooner or later you will get flooded out. There is no question — it’s a matter of when, not if.
There was a time when people could take comfort in the assumption only a “flood of the century” kind of event could pose a risk to them.
Prime Minister Justin Trudeau, after his tour of the local disaster zone last week, commented people need to wake up to a new global reality where those “hundred-year floods” might now take place every 10 years, maybe even more often.
Do your homework, assess flooding threat
Most municipal zoning maps show floodplains.
Do your homework when looking to acquire property. As part of your normal due diligence, one or more of the professionals with whom you are dealing, such as the lawyer or the real estate agent, should be advising you about local flood risk and whether that property is in an identified flood zone.
We might be due for a change in legislation to oblige real estate agents or lawyers to make sure a floodplain report is obtained.
Check for yourself to see if the property is adjacent to an area deemed “flood fringe,” “overland flow,” or even “under review.” Research the historical record to see how often high-risk flood occurs; but again, these days, you can’t trust that Mother Nature won’t smash through old records.
Another colleague just purchased a home in Perth, Ont., in a known flood zone. This spring was an excellent test of his actual flood risk. He stayed high and dry while his new neighbours across the road, who back on to the Tay River, were having water issues a month before the record rainfalls.
His home insurance costs are jumping by 50 per cent per year compared to what he paid on a large end-unit townhome in the Ottawa suburb of Stittsville.
A big part of that increase, of course, is the overland water coverage he has made certain to obtain. But he’ll gladly pay that premium, just in case.
Expect higher costs, development restrictions
Speaking with local municipal planners, he’s learned existing homeowners who do have homes now considered high-risk have faced new requirements when seeking building permits to make additions to their properties.
Rather than compound an existing problem, they must meet new building code requirements for how far from the water’s edge, or how elevated, their new additions must be.
So, you’ll see properties in the neighbourhood with split-level basements – the new half is two feet higher in elevation than the old – or there will be no basement at all because the property owner wasn’t allowed to add one.
Your best bet is to avoid a flood plain entirely, or at least read the fine print of your insurance policy and make sure you have full coverage for all things water-related – a basement penetration related to a saturation of the water table, an overland water event, or even a sewer backup.
One form of water coverage does not cover you for another. You must ask for that specific coverage and might have to turn to a broker to help you find an insurer willing to even offer it, at whatever price.
Hundreds of home and cottage owners in Ottawa-Gatineau learned this lesson the hard way in the last several weeks. It remains to be seen how this year’s record flooding will impact the resale value, market appeal and insurance rates of these properties going forward.
To discuss this or any other valuation topic in the context of your property, please contact me at [email protected]. I am also interested in your feedback and suggestions for future articles.