Up to 10% of homes could now be 'uninsurable' because of flood risk. Could yours be one?

Many homeowners are unprepared for flooding because they lack critical information thanks to murky real estate rules, incomplete floodplain maps and an insurance industry pulling back from high-risk areas, a Marketplace investigation has found.

Marketplace also found homeowners who lost their flood protection because of multiple claims or specifically because of the growing risk of climate change. The Insurance Bureau of Canada (IBC) warns it's a situation more Canadians could find themselves in.

The IBC told Marketplace it estimates that anywhere from six to 10 per cent of Canadian homes are currently uninsurable due to flooding and that estimate could go up as more insurance companies update their risk assessments to account for the rising threat of climate change.

"As the risk from climate change increases, yes, more Canadians could become uninsurable," said Craig Stewart, vice-president, federal affairs with the IBC.

According to a 2019 federal government report, Canada's climate is warming at double the rate of the rest of the world, and the IBC estimates that currently 1 in 10 Canadian homes are at high risk of flooding and some face possible repeated flooding over the next 20 years. 

But would prospective homeowners be warned about that risk? Going undercover, posing as new homebuyers in Ontario, a Marketplace team found there's no Canada-wide requirement for agents or sellers to warn potential buyers that they're moving into a flood-prone area. Marketplace was told on two occasions that homes were not in floodplains when public data showed otherwise. In another test, a producer posing as a prospective home seller also found agents didn't always advise her to disclose past flood damage.

The recent flooding in British Columbia has made the issue of flood insurance coverage top of mind for many homeowners, as some residents there, unable to find coverage, turn to provincial disaster assistance, and others assess what coverage they have as the cleanup begins. 

But in some cases, even being prepared isn't enough. Derrick Terakita knew his home in Richmond Hill, north of Toronto, was in a floodplain and thought he had adequate coverage, until he got his insurance renewal this year. In May his insurance provider informed him it was taking away his overland water coverage. The reason: the increasing severity of weather due to climate change.

"I was a little bit ticked off, but then it's an insurance company, they're trying to protect their money," Terakita told Marketplace.

WATCH | Insurance nightmares: Many Canadians not protected from flooding disasters:

Overland flood insurance typically protects homeowners from flooding from a body of water overflowing onto dry land. According to the IBC, protection from flooding due to burst pipes or appliances is typically included in most home policies. Sewer backup protection is also commonly available as an add-on. But overland flood insurance only became an option in Canada in 2015, following massive flooding in southern Alberta in 2013 that, at the time, was ranked as the costliest natural disaster in Canadian history. 

Marketplace connected Terakita with an insurance expert to better understand his situation. He then contacted his insurance broker to see if his provider could reinstate his coverage if he took steps to protect his home. The answer was no. 

"We can't really offer the coverage because again, it's no longer applicable to your territory," the broker told Terakita over the phone as Marketplace cameras rolled. "Even if there was some sort of mitigation put into place, it's still not going to be applicable."

Marketplace showed Terakita's experience with his insurance company to Jason Thistlethwaite, an associate professor in the School of Environment, Enterprise and Development at the University of Waterloo in Ontario.