The Royal Institution of Chartered Surveyors says that you're in big trouble if you can't get insurance for your home. Mortgage lenders won't lend money on homes that can't be insured, so their value could drop by up to 80%.
Most likely, your house won't be insured because there's a high chance of flooding. A recent survey found that 6.5 million homes are already at risk of flooding, and 1.5 million of those are in high-risk areas. The government has finished flood defences in many of these areas, and this year, 80,000 more homes will be protected. But there are also worries about the 120,000 new homes that are planned for the Thames Gateway and could be in a high "at risk" zone. Still, many places are still at risk. And if global warming keeps going, the 1.5 million people who are at risk could grow to 3.5 million by 2030. Back in 2003, the Association of British Insurers (ABI) agreed on a set of principles that required UK insurers to offer home and contents insurance for homes in areas where flooding is likely to happen once every 75 years or more. The condition was that the flood defences had to be up or would be by the end of 2007.
The Department for Environment, Food, and Rural Affairs (DEFRA) is in charge of building and keeping up these flood defences, but the insurance industry is worried that not enough is being done. So, the insurance companies have warned the government that if progress isn't made faster, many people could lose their insurance coverage.
In the meantime, people who live in areas where floods are likely could see their insurance rates go up. Even though the insurance industry agreed to cover people, all they promised to do was keep premiums at "reasonable" levels. But it didn't say what the word "reasonable" means. As a result, premiums have often gone up by 60%, and in some bad areas, they have gone up by as much as 400%. In a very small number of cases, coverage has been taken away completely. This mostly happens in rural areas where DEFRA thinks it would be too expensive to protect a small group of homes.
Environmentalists say that the UK's current bill for flood damage, which is GBP950 million a year, could go up to GBP3.2 billion if DEFRA doesn't do something soon. After all, the average claim for flood damage to a home is GBP30,000, which is even more than the average claim for fire damage. Local events, such as the flood in Boscastle, Cornwall, in 2004, can cost the insurance companies more than GBP15 million.
Visit www.environment-agency.gov.uk if you aren't sure if your home or the place you want to live is in a flood risk area. On DEFRA's website, you can find out if they think your home is likely to flood. Their maps were first made to help with planning and give information based on post codes.
Many insurance companies use the DEFRA data, but some, like More Than, have their own flood maps. These aren't based on post codes, but on the homes themselves. This means that if your current insurer raises your premium because of flood risk and uses DEFRA data, you may still be able to get a cheaper rate from an insurer using its own flood data if its data shows that your property is outside the "at risk" zone.
The ABI has recently put more pressure on DEFRA to build and improve flood defences more quickly. It has warned that the insurance industry might not stick to the 2003 principles if the government doesn't spend more money on flood defences.
That's bad news for many people who own their own homes.
