Flood Re – What it means for your home insurance?
August 3, 2016
In the UK over 5.2 million domestic properties are at risk of flooding. The problem is growing and climate change means that within the next 20 years half a million more homes will be at a significant risk of flooding.
Out of the current 5.2 million homes, 2.4 million are at risk from river or coastal flooding and 3.8 million from surface water flooding. Knowing the effects of flooding can be very severe, what are the implications for insurance?
With effect from the 4th April 2016, the government and Association of British Insurers have responded by setting up Flood Re, a not-for-profit organisation, which should make domestic flood insurance available and more affordable for home owners. The scheme will be available for a period of 25 years.
An annual levy will be paid by all insurers authorised to write home insurance in the UK and is set at £180 million per year for the first 5 years. This will be charged based on each insurer’s market share. Insurers are likely to pass this levy on to customers in the form of a rate increase of around 2% to 5%. Customers deemed to be at risk of future flooding will have the price of the flood cover calculated according to their council tax band.
Customers will continue to buy their home insurance and make any flood claims in the normal way. Although Flood Re will not be responsible for setting prices for home insurance, the objective is that, due to its existence, there will now be a number of options available for households at risk of flooding, and this number will significantly increase.
Which properties will be eligible for Flood Re?
Which properties are excluded from the scheme?
Property damage caused by flooding is one of the most disruptive experiences a home owner can face. Having a comprehensive home insurance policy will alleviate some of the costs of the damage caused to your home and personal belongings.