flood risk on trent road, nottingham

Risk of flooding at Trent road Beeston:
The UK of late has become prone to catastrophic flooding. The losses amounting due to this have made flood insurance purchasing a common concern for property purchasers. 5.2 million properties in England are at a risk of flooding, this has become a serious issue for property owners. Since you are purchasing a property 154 Trent road, Beeston NG9 1LQ, according to the Environment Agency flood risk map, this comes under a medium to low risk zone however till 2012-2013, this was a high-risk zone. The Trent Left Bank Flood Alleviation Scheme (FAS) reduced the risk of flooding to 16,000 homes and businesses along a 27km stretch of the River Trent and reduced the probability of flooding from 2% AEP (1 in 50 year), to 1% AEP (1 in 100 year). (http://cms.nottinghamshire.gov.uk/sfra.pdf). Despite the flood defences being built, they have not been tested and chances of them being overtopped or failing are prevalent. The risk being low to medium implies this area has a chance of flooding of between 1 in 1000 (0.1%) and 1 in 100 (1%) in the low risk area and between 1 in 100 (1%) and 1 in 30 (3.3%) in the medium risk area.
The property is priced at approximately £120,000 and the contents you would have would be worth £30,000. Keeping this in mind as well as the probabilities of flooding in this area, we can estimate the cost of losses to be within £375 – £1238 per annum. This range highlights the necessity of having a flood cover as part of the bundle insurance to avoid the high cost of clean-up and repairs following a flood.

Factors to take into account in deciding whether or not to buy insurance cover for flood risk:

Mortgage requirement- financial institutions insist on homeowners purchasing buildings insurance, including flood cover when buying a house against a mortgage. In order to the eligible to receive the mortgage, an insurance cover for flood risk will be needed and would be inclusive in a buildings insurance bundle. A bundle insurance purchased from the one insurance provider will cover you for catastrophes like fire, storm, theft, earthquakes etc, at a 10% lower cost than individual cover for these perils. In the UK, it is common to buy flood cover under a bundle insurance thus you will need to ensure that you have flood cover included in your insurance bundle especially when purchasing the property against mortgage.

Type of insurance- buildings insurance (bundle) as seen above is the most common type of insurance taken by homeowners. It covers on how much it would cost to rebuild your home in the event of it being destroyed by a catastrophy. If you plan to live in the house yourself, it would also be a good idea to get your contents insured, as there is a risk of flooding that could damage the furniture, fixtures and other contents of the house. But if you do plan to rent the house to tenants, you could have only buildings insurance and do away with the contents insurance unless you are providing your tenants with significant contents.

Risk- typically the amount of risk determines the demand for the insurance and affects the premium, excess and deductibles. Higher the risk, higher will be the demand for the insurance at a higher premium with lower excess. It has been established above that NG9 1LQ lies in a medium to low risk area thus the need for flood cover exists which would be available to insure against damage to the building.

Risk aversion- Your personal perspective towards risk would also influence your decision to buy insurance cover for flood. If you are risk averse, you would have a high demand for insurance considering that the house you are buying lies in a low to medium flood risk zone. In this scenario, you will be willing to pay a higher premium to cover the expected loss that would arise due to flooding. Conversely if you are not risk averse, your demand for the insurance would be low and you could be insured at a lower premium at the opportunity cost of covering the entire proportion of the expected loss if the house gets flooded.

Income- As a recent graduate in the first year of employment, it will be a good idea to be covered under buildings insurance. With an annual salary of about £25,000 you will not be prepared for unexpected costs that arise due to flooding. With a building insurance that covers flood insurance at a reasonable premium and not a very high deductible, financially you will not be pressurized in case there is a flood due to overflowing of the Trent River.

Price- the premium charged for an insurance policy is negatively related to the demand for the insurance, which arises from the level of risk associated. While selecting an insurance cover, it is wise to keep in mind the risk level, estimated loss and damages cost, the rebuild value of the house over the market value and finally your income. To be safe in your new home that is in a medium to low risk area, it is wise to insure yourself at a premium that is sufficient to cover your loss in case of damages.