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Why Your Overland Water Coverage Insurance Rates Vary Based on Where You Live

Posted Mar 7th, 2023 in Did You Know?, General, Home Insurance, HOMEINSURANCE, In the News, Insurance Tips, Media, TENANTINSURANCE


As water damage is now the #1 cause of home insurance claims in Ontario, many people are talking to their insurance broker about additional, optional coverages that they can add to their home insurance policy, to ensure they are fully protected when it comes to the threat of water damage. One of these coverages is overland water coverage. 

What Is Overland Water Coverage?

Sometimes referred to as “flood insurance,” overland water coverage is designed to provide coverage against damages caused by freshwater floods. It can cover water damage caused by the overflow of rivers, lakes, or other bodies of water, or by the sudden and accidental accumulation of water due to heavy rainfall. This type of coverage includes protection against water that enters through cracks or windows, sewer backup caused by heavy rain and freshwater overflow, and accidental dam break.

However, not all homes may be eligible for this coverage, especially those located in high-risk flood zones. Factors that determine eligibility could include driveway slopes toward the house and houses located within 100 meters of a flowing body of water. If you are eligible for this coverage, it must be added to an existing policy that already includes sewer backup coverage, and the cost varies widely depending on factors such as location, the limit of coverage, and the deductible.

Some insurance companies are now using geocoding to determine coverage eligibility and limits for overland water coverage. This advanced approach to mapping risks allows insurance brokers to assess a homeowner’s risk more accurately than assigning an overland water territory based on a postal code.

What Is Geocoding?

Geocoding is the process of linking a location, such as an address, to specific geographical coordinates. These coordinates provide an accurate indication of the location's latitude and longitude.

GPS systems have employed geocoding for more than 10 years. However, it wasn't until the widespread adoption of mobile devices and mapping applications, like Google Maps, that this technology became popular. The majority of this data is now standardized and available for free.

How Geocoding Is Used In Insurance

Geocoding enables insurers to evaluate a property’s risk more precisely based on its location. Rather than only using a postal code to determine someone’s risk assessment, it precisely pinpoints a customer’s specific risk address (longitude and latitude). By reviewing the specific geographic location of a property, insurers can also assess the historical data on hazards that may have occurred in the area.

One example of such a peril is flooding, which can result in high costs of damage. Insurers that rate by peril may place more value on geocoding, which can help identify if a property is at risk of flooding. Factors such as the location of the property and its surrounding areas can greatly influence the likelihood of flooding. Geocoding can provide highly accurate geographic data that may differ by only a few feet, making it an important factor in pricing when underwriting a home insurance policy.

Geocoding is unlike the current underwriting of sewer back up and overland, where eligibility and limits are based on postal codes. Various factors are used to determine a customer’s exposure when assigning an overland water territory, including:

  • Elevation of the risk location
  • Topography of the risk location (i.e., where water can flow, accumulate, and/or spread)
  • Surrounding bodies of water
  • Historical rainfall statistics
  • Historical river flow data
  • Soil permeability
  • Severity and frequency of events
  • Snow-melt accumulation
  • Man-made structures that may alter the flow of water (e.g., dams, dikes, floodways, and reservoirs)

How Are Territories Assigned?

Geocoding is important when assigning territories because a situation may arrive where two risks on the same street or with the same postal code are assigned different overland water territories. Geocoding determines risk level independently, so the insurance company can determine the level of exposure to each individual customer. Each situation would be assessed independently and several factors, such as elevation and location will determine which overland water territory a customer fits into.

Although not all insurance companies geocode their policies, for those that do, it allows those insurance brokers and insurance companies to weigh risks more accurately for a property.

Contact your Ontario insurance broker to learn more about geocoding and to see if it applies to your home insurance water coverage.

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Disclaimer: The information provided on this blog is for educational purposes only and is not intended as professional insurance advice. The coverage, terms, and conditions of each insurance policy are unique and subject to individual circumstances. The information provided does not guarantee the availability or suitability of any insurance policy for your specific needs. You should not rely on the information in the blog as an alternative to professional advice from your insurance broker or insurance company. If you have any specific questions about any insurance matter, please consult a licensed insurance broker for personalized advice and guidance.

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