Everything you need to know about Canada’s National Flood Insurance Program
The federal government will soon provide flood coverage in areas considered high risk. In the meantime, compare personalized home insurance quotes with us to secure the coverage you need.
Samantha Kohn, Freelance Blogger
This post was originally published on September 23, 2023, and was updated on April 17, 2024.
For most Canadians, a home is the most significant purchase of their lifetimes – it’s something we save and sacrifice for, something that’s filled with our most prized possessions.
That’s why we purchase home insurance – to ensure that our home and its possessions are protected in case of a tragic accident like a fire or flood.
Flooding is the most common and expensive natural disaster impacting Canadian homeowners from coast to coast. Each year, Canadian homes, property and infrastructure face approximately $1.5 billion in flood damage, and around 75% of this damage is not covered by insurance, leaving residential property owners to cover the repair costs out of pocket.
Can you get flood insurance in a flood zone in Canada?
Unfortunately, flood insurance protection is usually not included in home insurance policies. Many insurance providers offer the option to add flood insurance to their regular policy at an additional fee in the form of overland water protection, sewer backup protection and coastal (storm surge) protection. However, these options are not available to all, particularly those Canadians living in areas that are at high risk of flooding.
Also read: How making multiple water claims impacts your home insurance coverage
Homes that are considered at high risk of flooding are typically located in coastal areas, close to dams, and in valleys at the bottom of mountains and large hills that experience water runoffs after a large rain storm or snow thaw. Flash flooding is also common within six hours of a heavy storm, making areas of the country that often experience heavy rain more flood-prone than areas with little rain.
Since insurance companies base their coverage and premiums on the level of risk they take on by providing the policy, it’s natural for it to be more expensive, and at times impossible, to purchase flood insurance if your home is considered to be high-risk for flooding.
Because of this, in 2021 it was estimated that up to 10% of Canadian homes were considered ineligible for flood insurance.
However, on March 28, 2023, the Government of Canada announced they would be instituting a National Flood Insurance Program which will ensure all Canadian homeowners have the opportunity to purchase flood insurance.
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How will Canada’s National Flood Insurance Program work?
The National Flood Insurance Program was allocated $31 million as part of the federal budget announced in March 2023.
The program is being developed in close collaboration with the Insurance Bureau of Canada (IBC), Public Safety Canada, Finance Canada, the Canada Mortgage and Housing Corporation and private insurance companies across the country. It is expected to launch in the spring of 2025.
Not only will this program ensure that flood insurance is available to all Canadian homeowners, but it will also ensure the coverage is affordable.
Canadians living in areas that are especially prone to flooding would typically face high premiums to compensate the insurer for their increased level of risk, which is why the federal government will be subsidizing premiums for this particular population.
Premiums for homeowners at an average level of risk will not be subsidized.
Who is eligible for Canada’s National Flood Insurance Program?
Every Canadian homeowner is eligible for the program, however, those living in flood-prone areas must purchase this additional flood insurance in order to be eligible for disaster assistance funding by the government if their area were to be hit by a heavy storm or hurricane.
Under the program, every Canadian will have the opportunity to purchase additional flood coverage, but government subsidies will only come into effect for those who are in flood-prone areas and would otherwise face higher-than-normal insurance premiums.
How much will flood premiums cost?
While the specific costs of this coverage are still unknown and will likely differ by insurer, a recent report filed by Canada’s Task Force on Flood Insurance and Relocation provided some ideas of what Canadians can expect.
So far, the best estimate is that those at high risk of flooding would have the opportunity to purchase flood insurance for $3,000 per year which would provide them $300,000 in coverage.
While this may seem like a lot of money, keep in mind that the average cost of repairing a flooded basement is over $40,000, and if you don’t have insurance, you could end up facing those repair bills on your own.
What are the different types of flood insurance coverage in Canada?
There are currently three types of flood insurance available in Canada. These are sewer backup coverage, overland water protection and coastal (or storm surge) flood coverage.
- Sewer backup coverage is added on to a basic insurance policy at an additional cost and provides financial protection against the costly damage caused by sewage or wastewater backing up into your home. This coverage can help cover the expenses of cleanup, repairs, and replacing damaged belongings, offering homeowners peace of mind in the face of unexpected sewage-related incidents.
- Overland water coverage is another insurance add-on that protects homeowners against damage resulting from water overflowing onto land from sources like heavy rainfall, snowmelt, or overflowing rivers and lakes. This coverage is particularly valuable for protecting against the increasing risk of flooding due to climate change and can help cover the costs of repairing water-related damage to structures and belongings.
- Coastal (or storm surge) coverage is another add-on designed specifically to protect homeowners living along the coastline from destruction caused by storm surges, which are common during hurricanes or other severe weather events. This coverage typically includes provisions for repairing or replacing damaged structures and contents, and may even cover additional living expenses if the insured property becomes uninhabitable due to storm surge-related damage.
Also read: Hurricane insurance – How you are (and aren’t) protected
Budget 2024 update
As part of Budget 2024, the Canadian government has cited advancing the National Flood Program as one of its key measures – this is to help lower costs and worries of homeowners about the potential damages caused by climate change.
The bottom line
In 2021, residents of Southern British Columbia faced devastating floods caused by an atmospheric river event. In 2022, Hurricane Fiona caused incredible amounts of damage in Atlantic Canada. In both of those cases, many homeowners faced significant damage to their homes that was not covered by insurance.
As climate change progresses, it is reasonable to expect these events to happen more frequently, and more intensely.
Today, there are approximately 1.5 million Canadian households located in areas considered to be at high risk for flooding, and many of those homeowners are currently not eligible for flood insurance.
The National Flood Insurance Program was put in place to prevent Canadian homeowners from being left to cover the costs of flood damage out-of-pocket. This program will ensure access to affordable flood insurance for all Canadian homeowners, regardless of their level of risk.