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Homeowners in flood-risk areas face insurance nightmare

Simon Ward
by Lovemoney Staff Simon Ward on 19 July 2012  |  Comments 4 comments

Insurers are charging sky-high premiums or even refusing to insure homes in flood-risk areas due to the expiration of an agreement to offer low-cost cover next June.

Homeowners in flood-risk areas face insurance nightmare

Some homeowners trying to renew home insurance policies to cover them in the event of floods are either being rejected or facing massive premiums, according to the Local Government Association (LGA).

The LGA represents local councils in England and Wales. It says that the end of an agreement between the Government and the Association of British Insurers (ABI) next June is leading to homes in flood-risk areas effectively being ‘blacklisted’ from renewing or buying a policy beyond that date.

The agreement, known as the Flood Insurance Statement of Principles, means insurers have to offer affordable cover to flood-risk homes.

The ABI says it is unwilling to renew the Statement of Principles as people in low-risk areas pay more to subsidise those in high-risk areas, high-risk customers are tied to their existing insurer and insurers have ended up with a disproportionate amount of high-risk properties.

Instead, it wants a 'risk pooling' approach, with the Government sharing some of the risk.

The LGA says homeowners in Devon, Huddersfield, Kent, Nottinghamshire and Worcestershire face the greatest risk of being priced out of the market for home insurance. It says it is already hearing of cases in these areas. Earlier this year, the ABI published its own list of areas where homeowners would face higher premiums.

As well as the risk of losing their home and possessions if floods do strike, having an uninsured home could leave homeowners in breach of their mortgage agreement. Property data analysts xit2 have warned that prices for these uninsurable properties could plummet if the only potential buyers are cash buyers. We looked at this issue in more detail in These homes are about to become worthless.

The LGA says around 100 out of 800 homes hit by floods in the north-west of England earlier this month were uninsured.

More on flooding and home insurance

Compare home insurance quotes

200,000 homes in flood areas face insurance crisis

Protect your home against flooding

How to claim on your insurance after a flood

Home insurance: what you can't claim for

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Comments (4)

  • Meanmachine2
    Love rating 37
    Meanmachine2 said

    It's not just flood areas that the insurance companies are looking at.

    I live in Cornwall near the sea & I know that my house is 30 feet above high tide level.

    I had one insurance company refuse to quote buildings & contents, the reason being that I lived NEAR an area that might flood.

    Report on 19 July 2012  |  Love thisLove  0 loves
  • electricblue
    Love rating 653
    electricblue said

    More needs to be made of individual flood protection measures for houses. Plenty can be done and there is vast expertise in this field. Insurance companies are too broadly based and not very smart but people should be prepared to have flood damage excluded from policies and take their own prevention measures.

    Report on 19 July 2012  |  Love thisLove  0 loves

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