Many have seen their premiums soar or been refused cover altogether, as the UKs increasingly stormy weather cost insurers more than 1.4billion for the last winter alone. One in six homes in England, around five million in total, may now be at risk of flood, according to the Environmental Agency.
The average claim during the winter floods was for 22,339 per home, rising to 36,483 for those in Cumbria, Lancashire and Yorkshire who were affected by severe floods in December, according to MoneySupermarket.com figures. Households that have claimed for flood damage typically see their premiums rise by more than 200 per cent, adding 372 a year to the cost of cover, while some face excesses on future claims of up to 20,000.
A new Government-backed scheme called Flood Re, which launched on Monday, should ensure those most at risk can still shop around for affordable cover. Around 350,000 of the worst-hit homes could see their premiums drop by more than a third, with excesses also falling to more reasonable levels under the scheme, a world-first, organised by the Department for Environment, Food & Rural Affairs and the Association of British Insurers (ABI).
Flood Re is not a home insurer itself and does not set insurance premiums. Instead, the scheme is making a pool of money available to insurers to cover the extra cost of covering afflicted properties. A string of insurers have already signed up to the scheme, including Admiral, Aviva, Churchill, Direct Line, Halifax, Legal & General, HSBC, LV, Lloyds, More Than, Nationwide, NatWest, Sainsburys Bank and RBS.
However, it may take some time for the savings to filter through to homeowners in the shape of falling premiums and excesses. James Dalton, director of general insurance policy at the ABI, says: More providers will join over time, bringing even more choice for people with homes at risk of flooding.
Dalton said flood-affected homeowners should wait until their policy comes up for renewal rather than rush to use the service now. You may find an even greater choice of cover in a few months time.
However, Dan Plant, editor-in-chief at MoneySupermarket, says households who pay high premiums or who face massive policy excesses should run an online quotation today. If you can make substantial premiums savings on your existing policy it may be worth cancelling and taking out a new one but watch out for a cancellation fee.
If you have made a claim on your old policy then no premiums will be returned, but switching could still save money, Plant says. Insurer Aviva is offering quotes under Flood Re for new customers and will offer renewal quotes from May 5. It will also remove additional flood excesses from the policies of existing customers at renewal.
Simon McCulloch, director of insurance at CompareTheMarket. com, says homeowners in at-risk areas should start to see cheaper premiums and excesses when they search for cover. Many will see their premiums fall significantly, especially from late April as insurers get their systems updated.
He says customers should continue to compare prices as before: The search on our site remains seamless and people will not know which insurers are taking advantage of Flood Re or not.
The downside of Flood Re is that every homeowner will foot the bill for bailing out flood-prone households. This scheme will be funded by a charge of 10.50 a year on everybodys premiums, with the rest coming from a levy on insurers.
Ian Hughes, chief executive at Consumer Intelligence, says this will push up the cost of cover further following Chancellor George Osbornes recent moves to hike insurance premium tax (IPT). Average home insurance costs have been increasing for the past three months because of the IPT rise from 6 per cent to 9.5 per cent in November. It will rise again in October, adding a further 0.5 per cent to the cost of every policy.
If unsure whether you are paying a flood risk premium you should speak to your current insurer or broker. Find out more at Floodre.co.uk.