A ground-breaking new scheme launches today that will help lower the insurance costs of properties that are at risk of flooding.
Flood Re is designed to help households at risk of flooding get affordable insurance cover. It is a joint industry and government sponsored scheme with a fixed premium geared to council tax bands. This should help limit the excess and ensure those at risk are protected with content and buildings insurance.
While the consequences of flooding can be devastating for homeowners, the impact is often compounded by skyrocketing premiums and excesses.
If your property was built after 1 January 2009 you will not be protected by Flood Re. This is to discourage developers building new properties on floodplains.
Businesses are not covered by the scheme and properties owned by landlords are also excluded, though tenants are able to arrange cover for their contents. Buy-to-let landlords will therefore not have their premiums capped and may struggle to find insurance.
Leasehold blocks of more than three properties are also not eligible for insurance as they are considered to be part of a commercial enterprise.
The Environment Agency estimates that approximately 5.2 million homes in England and Wales are at risk from flooding, and experts predict that climate change is going to make the problem even worse.
Flood Re covers the cost of flood damage to properties in return for a premium paid to it by insurers and a levy. The Association of British Insurers says that the scheme could benefit between 300,000 to 500,000 homes who would otherwise struggle to obtain affordably priced insurance.
A survey of 1,000 homeowners by insurer Admiral found that two thirds (67%) believed severe flooding events will become more frequent in coming years, but only 15% had heard about the scheme.
Head of household at Admiral, Noel Summerfield, said: “Although Flood Re won’t prevent flooding, it is good news for homeowners who have been previously flooded or who have had difficulty getting insurance because their home is at risk of flooding. However our research shows only 15% have heard of the scheme. Flood Re works by charging all home insurers a fee and it’s this fee along with other charges to insurers using the scheme that pays for any associated flood claims.”
“The Environment Agency estimates that one in six homes are at risk of flood in England alone. Most experts agree that incidents of flooding are likely to become more commonplace, so perhaps those considering buying a home should do more research around the risk of flood.”
James Dalton, director of general insurance policy at the ABI, said: “It’s great to see so many insurers ready to make use of Flood Re from launch. Monday is just the start of a process and we know more providers will join them over time, bringing even more choice for people with homes at risk of flooding.
“Insurance is an essential safeguard for your home and belongings. People in flood risk areas not being able to access affordable cover was a major concern, and why the insurance industry went to great lengths to design and create this world-first solution along with government.”
Insurers that have signed up for the scheme include:
Admiral, Avantia (HomeProtect), Aviva Home Insurance, Bank of Scotland, Cherish Insurance Brokers, Churchill, Direct Line, First Direct Home Insurance, Halifax, Hiscox Broker, Legal & General, HSBC Home Insurance, Liverpool Victoria, Lloyds Bank, More Than, Nationwide and Privilege.
