Until now, insurers have agreed to continue to offer cover to homes at vulnerable areas in exchange for government investment in flood defences.
However, this agreement, known as the Statement of Principles, is due to expire at the end of June.
And currently, insurers say they have no plans to renew the arrangement, as they feel the government is not spending enough on flood prevention.
Government & insurers standoff over flood cover
Gareth Lane, is head of home insurance at Confused.com.
He explains: "As things stand, no agreement has been reached between the Association of British Insurers (ABI) and the government."
The ABI is the body that represents the insurance industry.
"Talks are ongoing but without a new agreement the existing arrangement will end next month."
Impact on home insurance costs
To date, there has not been any major change in the pricing or availability of buildings insurance, says Lane.
But he warns that expiration of the agreement could have several effects.
"Insurers might significantly raise your home insurance excess – the amount you contribute towards a claim.
"In some cases, a person's excess for flood damage might exceed £10,000."
Equally, says Lane, insurance providers may raise premiums for those living in areas that are at risk of flooding.
"This would create a situation where home insurance becomes a significant household expense – or even unaffordable."
Insurers may withdraw cover entirely
In the worst case scenario, there are concerns that insurers may refuse to insure properties in high-risk flood areas altogether.
"This would be extremely serious, as lenders won't offer mortgages to homeowners who don't have buildings insurance in place," says Lane.
"This could affect the housing market negatively in some areas.
"At the very least, properties that are very expensive to insure could be seen as less desirable, and that could be reflected in their value."
Insurers & government say flood talks 'continuing'
If insurers no longer guarantee to provide cover in areas where no improvements in flood defences are planned, this could leave up to 200,000 homeowners across the country unable to get affordable home insurance.
This is according to the ABI.
The impact of this would be that these individuals would be unable to remortgage or sell up and move, as lenders won't offer mortgages to homeowners who don’t have buildings insurance in place.
A spokesman for the ABI says: "We continue in discussions with the government on the model we have developed to safeguard the availability and affordability of flood insurance for those at high risk.
"In addition, we need consensus on sustained targeted flooding investment and sensible planning decisions.”
Government 'working with insurers'
A government spokesman for the Department for Environment, Food and Rural Affairs says: "We want flood insurance to be affordable and remain widely available.
"We are working with the insurance industry to ensure this will be the case."
What action can homeowners take?
However, the end of June is looming ever-closer and, as things stand, there is still no sign of an agreement being reached any time soon.
This leaves those living in flood-risk areas in a potentially precarious position.
"The problem is, there is not much that homeowners can do to directly influence these negotiations – and certainly not in the small time-frame available," says Lane.
"However, if you live in a flood-risk area and come home insurance renewal time you are not happy with the premium or excess offered, you don't have to accept this.
"It's definitely worth shopping around, as other insurers may well offer you a better deal."
How to get flood cover
Most home insurance policies will cover flood and storm damage.
But levels of cover do vary between insurers, so dig out your home insurance policy to find out exactly what you are covered for.
Preparation is key so keep abreast of wet weather warnings.
You can register online with the Environment Agency's Floodline Warnings Direct service, which provides flood warnings by phone, text or email.
A similar flood alert service is run by the Scottish Environment Protection Agency (SEPA).
If you live in England or Wales, the Environment Agency produces flood maps which are viewable online. Scottish residents should contact SEPA.
source: confused.com
