Why you pay out of pocket for flood damage and other things to know about disaster insurance

Did you know most insurance policies don't include 'overland' flooding? CBC posed viewer questions to insurance lawyer Josiah MacQuarrie about nebulous policies, ageing infrastructure and more.

Lawyer Josiah MacQuarrie answers some key questions about property protection from environmental damage

Francois Lussier rows a small boat along a flooded street in the town of Rigaud, Que., west of Montreal on Monday, May 8, 2017, following flooding in the region. (Graham Hughes/The Canadian Press )

Did you know most insurance policies don't include 'overland' flooding? CBC posed viewer questions to insurance lawyer Josiah MacQuarrie about nebulous policy language, ageing infrastructure and more.

1. Too much rain causing indoor puddles? You're probably not covered.

"Your typical insurance policy excludes 'overland flooding,'" said MacQuarrie. 

The term refers to what we're seeing now in Quebec and Ontario, with water damage caused by rainfall, swollen rivers and rising water tables.

Most people don't know that overland flooding is an add-on, MacQuarrie explained. 

Clients usually need to pay more in an additional policy to protect themselves against this type of water damage, which insurers view as foreseeable and preventable with proper home maintenance.

To qualify for most basic coverage, the source of the water damage needs to be unexpected, like a broken dishwasher or burst pipe.

But the "natural ingress" of water — like the kind you get when your foundation starts leaking — typically isn't covered, said MacQuarrie.

Volunteers fill sandbags in the town of Hudson, Que., west of Montreal, following flooding in the region. (Graham Hughes/The Canadian Press )

2. Climate change is making floods more likely.

Extreme weather claims in Canada have gone up 400 per cent in the last eight years, said MacQuarrie.

And insurance companies are prepared. "The insurance industry has been seeing this for some time," he added. 

In the face of a changing climate, insurance providers are devising strategies to deal with extreme events like floods by evaluating the kinds of products they offer and how they handle claims.

MacQuarrie says more weather events mean more claims are paid — which probably mean higher premiums in the long run.

3. If you live in a flood plain, you'll pay a lot more.

The trick is to know you're buying in a flood plain before making a down payment. But what if you already live in a place prone to floods?

For some that live in high-risk areas and want overland flood insurance, "you're going to pay a lot for it," said MacQuarrie. "It may be that the cost is just prohibitive."

The Pierrefonds district of Montreal is seen after widespread flooding across the region. (Paul Chiasson/The Canadian Press )

4. Once the flooding stops, a lot of people will find they're uninsured.

"It's tragic," said MacQuarrie, but many people will discover their policies don't cover flood damage — or the costs of shelter from fleeing their homes — in the coming days and weeks.

That means many will be looking to their provincial government for help.

It's possible that disaster relief payments may depend on whether or not a home is insured, as they did in Windsor, Ont. last fall, when heavy rainfall caused widespread basement flooding.

Aid to impacted people in Windsor was dispensed on a case-by-case basis, and there were different options for homes that had insurance and those that didn't.

But the guidelines from Public Safety Canada, the federal body that provides disaster relief funding to the provinces for distribution, state that insurable property isn't eligible for reimbursement. 

"Insurable," according to the guidelines, means that "insurance coverage for a specific hazard for the individual, family, small business owner or farmer was available in the area at reasonable cost."

Canadian Forces personnel wade through the flooded streets in Deux-Montagnes, Que. (Ryan Remiorz/The Canadian Press )

5. Insurance companies aren't evil. But they are businesses.

While insurance providers are "in the business to make a profit," according to MacQuarrie, they're also obligated to pay claims under the legal terms of their policies — meaning that if it's on paper, they've got to pay.

But confusion arises when clients misunderstand their coverage.

MacQuarrie cautions renters and homeowners to check their policies carefully, and seek help from a licensed broker if they're having trouble understanding the language.

"There's an obligation on people who purchase insurance to know what's covered and what isn't," he said. "Whether or not the average person is going to sit down and read their policy cover to cover? It's unlikely."

6. Renters need coverage, too.

Just because you don't own that condo doesn't mean you get to skip insurance bills.

Tenants can purchase contents insurance to cover water damage to their furniture, electronics and other valuables.

"It's certainly something that anyone who is renting a property should be looking into," MacQuarrie said.

7. Different types of damage aren't equal.

It's a costly distinction, and one made regularly by insurers. Why are some kinds of damage covered, but not others?

Higher-risk items often get removed and are offered as add-ons instead, according to MacQuarrie.

Without those distinctions, basic premiums would be too high to remain competitive, he explains. 

"If every possible loss was covered on a homeowner's policy, the typical person probably couldn't afford insurance."