Flood insurance in Canada
Reviewed by Daniel Mirkovic and Stefan Tirschler
Updated April 28, 2023
Floods are destrutive events. As weather patterns change, unpredictable rainfall and snowmelt will undoubtedly lead to worsening flood conditions across Canada.
Does your home insurance policy protect you from flood damage? The answer isn’t simple; read on to learn all about flood insurance options in Canada.
Is flood insurance even necessary in Canada?
First, it’s important to distinguish flood damage from water damage.
While flood damage involves water, insurance deals with flood losses very differently than it deals with ordinary water losses. To be specific, flood damage means loss or damage caused by surface water originating from rain, snow, overflowing rivers, lakes, and other bodies of water.
Under most home insurance policies, water damage does not include flooding at all; it refers to sudden and accidental loss or damage caused by pipe breaks, failed water heaters, overflowing bathtubs or toilets, etc. Flood damage is not included in a home insurance policy’s basic water damage protection.
Historically, it was almost impossible to get insurance for residential flooding in Canada.
This was because of adverse selection: only the people with high risk of flood damage would purchase the insurance. Since those purchasing insurance would be the same people to draw heavily upon it when flooding occurs, the cost of this insurance would be impossibly high for these few customers to pay. However, as the weather continues to change and inland flooding becomes more common, many more homeowners and renters need this coverage.
As a result, affordable and sustainable inland flood coverage is now available to many Canadians.
Inland flood coverage
Most home insurance policies differentiate inland flooding from coastal flooding.
Inland flooding occurs when freshwater or wastewater escapes the normal confines of a lake, river, canal, or other body of water. This is most often the result of heavy rainfall or snowmelt. Coastal flooding, on the other hand, is flooding caused by saltwater from the ocean. Coastal flooding is more often the result of tsunamis or unusual tides. Home insurance coverage for coastal flooding is rare.
But some providers, like Square One, now offer inland flood protection as an add-on to most home insurance policies. 94% of Canadian customers are eligible for this coverage.
Only homes in the highest-risk areas are ineligible for inland flood insurance coverage. Fortunately, for those homeowners and renters, there are Disaster Financial Assistance Arrangements in place.
Though funded federally, each program is administered at the provincial level. Accordingly, details vary from province to province. For example, there is the Disaster Financial Assistance Program in British Columbia. Of important note with this program is that it will not provide assistance to individuals who could have purchased private flood insurance and either chose not to, or failed to make an effort to do so. This puts the onus on homeowners and renters in British Columbia to thoroughly research the options available to them, and to purchase private flood insurance if it is available for their home.
Need help finding flood coverage?
To help homeowners and renters find coverage that will protect them from inland flooding, Square One created www.getfloodinsurance.ca.
This website explains water damage and flooding in detail, and provides a summary of the different insurance providers in Canada who currently provide inland flood coverage for homeowners and renters. We encourage customers who wish to learn more about inland flood insurance to visit this website for more thorough information.
Most home insurance policies offer protection against other types of water damage, including such losses as water backup, entry of water through an opening in the roof, burst water mains, and more. You can find more information about water damage on Square One’s water damage page.
Want to learn more? Visit our Home Insurance Basics resource centre for dozens of helpful articles to guide you through the ins and outs of home insurance. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.
About the expert: Daniel Mirkovic
A co-founder of Square One with 25 years of experience in the insurance industry, Daniel was previously vice president of the insurance and travel divisions at the British Columbia Automobile Association. Daniel has a bachelor of commerce and a Master of Business Administration (MBA) from the Sauder School of Business at the University of British Columbia. He holds a Canadian Accredited Insurance Broker (CAIB) designation and a general insurance license level 3 in BC, Alberta, Saskatchewan, Manitoba and Ontario.
About the expert: Stefan Tirschler
Stefan is responsible for underwriting leadership, market expansion, and product research and development for Square One's operations. Stefan has earned his Fellow Chartered Insurance Professional designation, and maintains a level 2 general insurance license in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. Stefan is also an Education Committee member and CIP/GIE instructor for the Insurance Institute of Canada.