After Toronto’s Major Storm: What Does Home Insurance Cover, and When Can a Claim Be Denied?

After the severe storm that hit Toronto and parts of southern Ontario on September 2, bringing heavy rain, flooding, strong winds and widespread damage, many residents are now facing an urgent question: will their insurance cover the losses?

The answer depends largely on what caused the damage and how the water entered the home, because a standard home insurance policy does not automatically cover every type of flooding.

What does home insurance usually cover?

Most home insurance policies may cover sudden damage caused by wind, hail or falling trees, subject to the terms and limits of the policy. Water damage, however, is more complicated.

Sudden internal water damage, such as a burst pipe, is commonly covered under standard policies. But water entering a home from outside because of heavy rainfall or surface flooding is generally not included automatically in basic coverage.

Homeowners usually need an additional endorsement known as Overland Water Coverage to protect against this type of flooding.

What about sewer backup?

If water or sewage enters a basement through drains or the municipal sewer system, the damage may only be covered if the policy includes Sewer Backup Coverage.

Ontario’s Financial Services Regulatory Authority, or FSRA, advises homeowners to check specifically whether their policy includes both overland flooding and sewer backup protection, because these are often optional forms of coverage.

When can an insurance company deny a claim?

An insurer may deny a claim when the cause of the damage is excluded from the policy. A common example is when a homeowner has only basic coverage, but the loss was caused by overland flooding or sewer backup and no additional coverage was purchased.

Claims may also be denied or reduced in cases involving long-term seepage, repeated leaks, poor maintenance, neglect, or certain types of groundwater damage, depending on the wording of the policy.

Providing inaccurate information or failing to disclose important details about the property can also create problems during the claims process. FSRA notes that policyholders are responsible for giving insurers complete and accurate information about their homes and any material changes.

What should homeowners do immediately?

The Insurance Bureau of Canada advises residents affected by severe weather to contact their insurance company as soon as possible to open a claim and begin the assessment process.

Homeowners should also photograph and document the damage before cleanup begins, keep receipts and invoices, prepare a list of damaged belongings, and take reasonable steps to prevent further damage where it is safe to do so.

The amount paid may also depend on whether the policy provides Replacement Cost coverage or Actual Cash Value coverage, which factors in depreciation.

What about flood-damaged vehicles?

For vehicles, coverage depends on the type of auto insurance purchased. Drivers should not assume that mandatory coverage alone will pay for flood or storm damage.

FSRA notes that payment for repair or replacement depends on the optional coverages included in the policy and the circumstances of the claim.

The federal government has also warned that flooding is among the costliest natural disasters in Canada, and that repairing a flooded basement can exceed $40,000 on average, underlining the importance of reviewing flood and sewer backup coverage before disaster strikes.