Flood Insurance risk for both existing and potential home owners

Flood Insurance risk for both existing and potential home owners

The Association of British Insurers (ABI) and the Government committed to provide affordable flood insurance to homes in “flood risk” areas, with the Flood Insurance Statement of Principles.  The initial Statement of Principles was agreed in 2000 and will lapse at the end of June 2013 with the ABI refusing to renew on the grounds that the agreement “grossly distorts the market”.
A meeting of the All-Parliamentary Group on 6th March highlighted the fact that finding suitable flood insurance will not just affect potential home owners but those who already own their home, with lenders at liberty to withdraw existing mortgages from home owners if a breach of their mortgage agreement becomes evident.
In light of the debate David Mole, Director of Landmark Environment Due Diligence, commented:
“The debate served to further highlight the potentially huge issues that homeowners and potential homeowners will face as a result of the ending of the Statement of Principles.  
As homeowners are required to insure their homes as part of a mortgage agreement, it is likely that the ending of the agreement will not only affect those looking to secure a new mortgage in order to purchase a property but also that those with existing mortgages could be at serious risk of being in breach of their mortgage agreement if they are unable to insure their property. With so many properties potentially affected, it is not only vital that the government intervenes, but also that homeowners and potential homeowners investigate their flood risk and put protective measures in place; it could mean the difference between obtaining flood insurance and meeting the terms of their mortgage or not”.
David went on to say that legal professionals should “urge clients to obtain a comprehensive flood report, either for their existing home or a property that they are considering purchasing”.
There is a worry that home owners who are coming up to their renewal in the next few months will be unable to obtain flood insurance due to the overlap of the renewal and the expiry of the Statement of Principles.  David continued:
“As a result of changing weather patterns which has made surface water flooding far more prevalent in recent years, even if a home is not near the coast or river and does not have a history of flooding, it does not mean that it is not at risk of flooding in future. Current and potential homeowners must be made aware of any flood risk to their home so that they may take necessary action, such as putting protective and preventative measures in place, in order to be able to obtain flood insurance and thereby meet the terms of their mortgage agreement”.
Landmark recommend that a Homecheck Professional Flood Report is an effective solution to home owners and home buyers alike, with David adding:
“Landmark’s Homecheck Professional Flood Report is the most comprehensive report of its kind and is a quick and cost-effective solution for property professionals to identify potential threat of flood and flag any threat to their clients. The report assesses all major types of flood risk with data sources including the Environment Agency, actual insurance claims data, an indication of insurability and geological indicators.
The report also includes the 100 and 1,000 year return periods supplied by the EA as well as a 75-year dataset. This is key for homeowners as the UK insurance industry (through the ABI) has committed to providing flood cover as part of standard buildings insurance in any location with a lower than 1 in 75 year flood risk. The report also contains ground-breaking data covering surface water (pluvial) flooding.”
David adds:
“With just a few months until annual insurance policies start to overlap the expiry of the agreement, an urgent solution needs to be announced so homeowners are not left in the predicament that they face having their mortgage withdrawn because they either are not able to secure cover or insurance premiums are so high that they are unaffordable. This issue is not going to go away and simply must be addressed and a solution found.
A lack of subsidy agreement between the Government and insurance industry could lead to insurance being unobtainable and unaffordable for many, many homeowners. This in turn could have a significant knock-on effect to the property market as a whole.” 
For more information and practical guidance on the increasing risk of flood, and details of how to order a Homecheck Flood Report, visit www.homecheckflood.co.uk.
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