Flood risk homes to pay more for insurance

It now looks certain that homes which have been flooded this year will see insurance premium increases or, in a worst case scenario, be unable to get insurance.

With yet more flooding, this time hitting Devon, Cornwall and Herefordshire, insurers have admitted that if adequate flood defences are not built by the government, at-risk homes will have to pay more for their insurance or go without.

Malcolm Tarling, a spokesperson for the Association of British Insurers (ABI) today said: "Insurance is about protecting yourself from the uncertain, but it now seems certain that some homes will be flooded again."

Without insurance it will be impossible to get a mortgage, so some people are now sitting in houses which are effectively worthless because they couldn't sell them even if they wanted to. Those properties subject to premium hikes will still be able to get mortgages - provided the insurance increase does not become prohibitively expensive for the buyer - because the mortgage lender will be assured of getting the property's value back if it is flooded and becomes un-sellable.

Bernard Clarke from the Council of Mortgage Lenders said: "It is more difficult to borrow on a property whose long-term value is not secure. But for us, insurance is the lynchpin. If the buyer can get insurance, they will get a mortgage."

It is still too early to say how many homes will be denied insurance when they come to renew their premiums, or how many will see premium hikes.

The ABI says it will have to wait until all the flooding has stopped and all the claims have been paid to get an accurate figure of how much premiums will need to increase by.

At present, insurers are looking at a bill of between ?400m and ?500m since the end of October: but this is likely to go up as the floods don't look like they are going anywhere soon.

The government, whose responsibility it is to put up flood defences, is currently reviewing the situation. However, it is likely to be several years until adequate defences are in place.

Buildings and contents insurance are the main areas of cover affected by the flooding, although car insurance could also go up in the risky areas.

The Environment Agency says over 50% of people living in flood risk areas are still not aware that their property may be in danger. In a bid to rectify the situation it has published a new flood risk map on its website. Users key in their postcode and the map shows if and how your property is at risk from floods.

Useful links
Environment agency
Flood maps online
The met office