As the time shortens between flood season and wildfire season in BC, news reports that victims of disasters may not be eligible for government financial assistance are worrying.
In short, disaster relief funds are meant for uninsurable losses. That means insurance coverage was both offered to you and reasonably priced – the industry term would be “readily available” – whether or not you accepted that coverage. If your insurance agent has offered you a rider for optional coverage for flood, wildfire, or earthquake and you decline it, you may not be eligible for any government assistance if that particular event causes damage to your home. While carrying additional home insurance in case of a natural disaster may seem like an unnecessary expense right now, you also need to consider what expenses your insurance would cover vs what you could expect to receive from a government program.
For example, at the time of writing BC’s Disaster Financial Assistance program pays victims of natural disasters up to $300,000 per household. You would then have to decide how to allocate that money against your costs to clean up your property, complete repairs, replace lost or destroyed personal items, and perhaps arrange for accommodation outside your home while the work takes place. Each of these costs adds up quickly, and if the disaster was widespread you may be facing higher prices since the services will be in demand.
On the other hand, if you are carrying adequate insurance coverage for any of those events, the cost of cleanup and repair to your home’s pre-disaster state will be fully covered; personal property will be replaced under a separate amount; and a set number of days will be defined in your policy for additional living expenses – meals and accommodations outside your home – if you’re displaced.
Here are some cases to consider:
In the past few years, Canadian insurance companies have started offering optional overland flood insurance to some customers. This is the only type of insurance that would cover you against damage from water originating outside your home, such as a flooding river or shoreline. If you live in an area where extreme flooding is less common – say every 15-20 years – you can expect your payments to be somewhere in the range of a cup of coffee a day. That cost will make sure that in a year with record high water levels you have peace of mind that if your home is affected you’ll be able to return it to the same condition.
Coverage for wildfire insurance is widespread across BC. However, some insurance companies may not be able to offer you a policy if you’re in an active wildfire zone – the buffer can vary between companies. That’s why it’s important to plan ahead and make sure your property is covered before your area is too badly affected. Most wildfire insurance will include the costs incurred if a mass evacuation is called for your area, but you should review the details with your insurance agent.
Earthquakes occur semi-regularly on Vancouver Island, and even a small tremor can cause expensive damage to your property. If you needed to complete repairs or even rebuild your home and replace your belongings, you would have to balance those costs with your remaining mortgage as well. However, if you have coverage in place your home insurance company would help manage the details.
Many mortgage lenders will require you to carry earthquake coverage on your home, since they also have an interest in the property and want to minimize the risk to their investment.
What About Condos?
You might be thinking that if you own a condo unit you’re in the clear – but that’s not quite the case! While the strata does carry insurance for the structure of the building in case of disaster, each owner must still pay a part of the deductible if a claim is made. Your homeowner insurance will only pay for your portion of the strata deductible if you have comparable coverage to the strata policy. For example, if the building is damaged in an earthquake and needs structural repairs that will be covered under the strata insurance, you will individually need to either have earthquake coverage on your home insurance policy or pay out of pocket for your portion of the deductible. It’s also important to remember that strata insurance will only return your unit to its original state and won’t cover any upgrades to floors, cabinets or finishes that you have made.
Natural disasters have been increasing in intensity, while the time between them decreases. Insurance is readily available in most areas as an addition to your homeowner policy at reasonable rates that will protect your property and give you peace of mind. In the case where your home is not insurable against a particular disaster, government assistance can help recover the costs of repair but likely would not cover your full financial burden.
Home insurance is a key requirement for your mortgage. The Auxilium Team is happy to provide you with a referral to our trusted partners for a consultation and quote.
Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.