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Monday, April 27, 2015

Flood risks and insuring house against such perils !

Common sense is expected to prevail in every action of human beings. ‘Act as if uninsured’ is a sound advice often dished out !

When water poured into their home last January it caused £125,000 in damage, with the house's hardwood floor, ground floor walls and electrics wrecked beyond repair. As the rain poured down, Mr Ivry's garden was left underwater and even though he tried to set up barricades at his garage and front door, he was unable to stop the water gushing in, leaving the ground floor under nearly half a foot. The house was in an island and flooding was but natural.  The owner thought of sealing the house with a barrier, waterproof doors and pumps to get rid of any ground water or leakage, but worried that just one tiny crack would mean water pouring into his home again.  He also considered demolishing the house completely.  The self-employed couple lost a year of business because they could no longer work from their home. ~ what they did is what this post is about !!!

A ‘ flood ’ is an overflow of water that submerges land which is usually dry. The European Union (EU) Floods Directive defines a flood as a covering by water of land not normally covered by water. Flooding may occur as an overflow of water from water bodies, such as a river or lake, in which the water overtops or breaches its confinement,  resulting in some of that water escaping its usual boundaries.   Floods can also occur in rivers when the flow rate exceeds the capacity of the river channel, particularly at bends or meanders in the waterway. Floods often cause damage to homes and businesses if they are in the natural flood plains of rivers.  Some floods develop slowly, while others such as flash floods, can develop in just a few minutes and without visible signs of rain.

Additionally, floods can be local, impacting a neighbourhood or community, or very large, affecting entire river basins. In some cities, new colonies get flooded and marooned because houses get constructed in places which were once bunds and lakes.  Flood is a peril that can be insured against. Presently, in India, we have the ‘Standard Fire & Special Perils Policy” .. which provides indemnity for named perils and the perils named in the Policy are : Fire; Lightning; Explosion/Implosion;  Aircraft damage;  Riot, Strike & Malicious damage;  Impact damage; Subsidence and Landslide; bursting and /or overflowing of water tanks; missile testing operations; leakage from automatic sprinkler installations; bush fire and …… wind and water perils named as “ Storm, cyclone, typhoon, tempest, hurricane, tornado, flood and inundation. ”

The  ‘wind and water perils’ – elaborately described as ‘Storm, cyclone, typhoon, tempest, hurricane, tornado, flood and inundation’ are part of Insurance coverage, without payment of any additional premium.   However for covering ‘Earthquake’ additional premium will have to be paid.  In our policies, the flood is not defined and for wind perils, universally reference is drawn to ‘Beaufort scales’.  In Australia, ‘flood’ as stated in Insurance policies – purported to mean ‘the covering of normally dry land by water that has escaped or been released from the normal confines of...a lake, a river, a creek or another natural watercourse a reservoir, a canal or dam. 

There are flood prone areas and in India, Insurers tend to avoid such bad risks.  In US, there are codified flood-hazard maps which helps determine the hazard exposure and type of flood insurance coverage one will need since standard homeowners insurance doesn't cover flooding.  The lower the degree of risk, the lower the flood insurance premium.  To reiterate, in US and in many other places, Standard home policy or Fire Policy does not cover flooding.  In USA, way back in 1968, Congress created the National Flood Insurance Program (NFIP) to help provide a means for property owners to financially protect themselves. The NFIP offers flood insurance to homeowners, renters, and business owners if their community participates in the NFIP.  In Mar 2014, President Obama signed the Homeowner Flood Insurance Affordability Act of 2014 into law.

Back home, even when insured, the policy holder is expected to prudent.  In flood areas, Risk Managers would advise to keep stocks well above the expected flooding levels.  Goods should be stacked on racks and kept a few feets above the ground level and not left on grounds.  Here is an interesting newsitem from MailOnline on what a family of Berkshire did !

Yaron Ivry and his family live in five-bedroom home on an island between water channels in Wraysbury, Berkshire.  Their house was gutted by floods last January when many of his neighbours couldn't return home. In bid to beat the frequent flooding, the family have spent three months and £80,000 lifting the house on to stilts. After the work raised the house five feet off ground, experts estimate it's now worth up to £2 million.

It is the news of  determined couple whose island home was wrecked when the Thames burst its banks last year have come up with a new idea - shifting their five-bedroom house 5ft into the air. Yaron Ivry and his wife Sigal have spent almost £80,000 jacking their riverside property in Wraysbury, Berkshire, up onto stilts, and filling in the gap with breeze blocks. Over the course of ten days, a team of engineers lifted the 80-ton building up into the air, using a steel cradle and 28 computerised jacks which pushed the house upwards at a rate of three inches an hour. Now, a year after the house was devastated by floods last January, work is complete with the house protected from the waters of the Thames, and the Ivry family enjoying a new basement underneath their home, as well as a new kitchen, replacing the one which was left underwater when the river breached its banks.

Mr Ivry hired specialist builders who created a network of steel beams under the house which would hold its weight as the property began to lift. Holes were bored into the brick walls, so supportive beams could put up both inside and outside the building.   28 super-strong jacks — each capable of supporting 50 tons — were placed underneath the steel cradle. A diamond-edged saw then sliced horizontally through all the brick walls below the level of the concrete floors, severing the building from its foundations.

   With the perimeter ring of steel steadying the structure and pressure spread evenly over the hydraulic jacks, no one part of the building was exposed to particular stress as it was lifted from the ground at a rate of three inches an hour.   The newly-formed gap at the bottom of the house was then filled with breeze blocks, and the steel cradle removed before the breeze block basement was concealed with reclaimed London yellow bricks, designed to match the rest of the house.  Mr Ivry's newly-raised front door now has a long staircase leading up to it, protecting the entrance to the house from any flood water.

The value of the house - which had been worth £1 million - dropped to £750,000 as it could not be insured against future floods. Now, after the £80,000 project the house is thought to be worth between £1.5 million and £2 million and Insurers are willing to cover the property at nominal rates. Now everyday as they look out of the window, they smile and are happy !  

With regards – S. Sampathkumar

13th Feb 2015.

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