Insurers do not fully cover damage caused by flooding, prompting some areas that are flood-prone to take drastic measures, including banning basements to mitigate risks. Is it time to have this practice adopted on a wider basis?
Elizabeth Peloza’s basement was recently finished when a July 2024 flash flood in London, Ontario, caused extensive damage. She later learned that not all of it would be covered by insurance. The flood contributed to more than $940 million in insured losses across southern Ontario.
Flooding is Canada’s most expensive natural hazard, with annual residential losses averaging $2.9 billion. A Canadian Climate Institute report estimates that by 2030, over 540,000 homes could be built in flood-prone areas, adding $2 billion in damages.
Standard home insurance often excludes overland flooding, requiring separate coverage. Because of this, renters in basement units face additional risks, as landlord insurance does not cover their belongings or relocation costs. In Toronto alone, 75,000 basement suites are at risk.
A growing number of policymakers and researchers are raising concerns about the viability of basement dwellings in flood-prone areas. Basements are the first to flood, leading to expensive claims, and in some cases, insurance denials when policyholders are deemed to have insufficient mitigation measures.
To mitigate future losses, Montreal's Ville-Marie borough banned basement dwellings in flood-prone areas in 2024. Ryan Ness of the Canadian Climate Institute suggests extending such measures, noting that basement flooding costs are rising significantly. He emphasizes the need for better insurance policies and government-backed mitigation efforts.
The federal government has revised its disaster relief program, covering up to 40% of costs for flood resilience upgrades. Additionally, the Intact Centre on Climate Adaptation recommended affordable preventive measures, such as sump pump maintenance and flood alarms, to reduce claims and losses.
Flooding risks are expanding due to climate change, with storms that once occurred every 20 years now projected to happen every five. As flood maps are updated, Peloza noted that some homeowners in her ward will no longer be permitted to add basement suites, further complicating housing availability.
For existing basements, mitigation measures can reduce risk and potentially lower insurance costs. The Intact Centre on Climate Adaptation recommends steps such as installing sump pumps, backwater valves, and flood alarms. London offers a grant program for basement flooding upgrades, but demand has increased following the summer floods.
With extreme weather events expected to intensify, insurers, governments, and homeowners are reassessing how to manage basement flooding risks. As Ness puts it, at some point, “you can't fight nature.”
