Flood-risk homes to be helped by insurance cap

Flood insurance premiums will be capped, linking them to council tax bands so that people will know how much they have to pay. (See our Home Insurance guide for help cutting your premiums.)

Insurers will pay a levy into a fund which will pay claims for people at a high risk of flooding.

Ministers had been locked in negotiations with insurance firms over a replacement for the "statement of principles" under which insurers provide flood cover for at-risk properties. This old agreement runs out at the end of July.

As the threat of flooding has grown across the UK, premiums and excess payments for homes in high flood risk areas have increased.

The Association of British Insurers (ABI) says the new deal will not push up insurance premiums, as households already pay £10.50 each to cover the higher cost of insuring flood-threatened homes. It is this money which will go into the fund.

Flood defences

The Government says £2.3 billion will be spent on flood defences before 2015, with 165,000 homes expected to be better protected as a result.

After that, ministers have pledged to spend £370 million on flood defences in 2015/2016, and maintain this level of spending over the following six years.

The Government hopes these extra schemes will help safeguard 300,000 more homes by 2021, bringing down the overall risk of flooding and the cost of insurance.

Environment Secretary Owen Paterson says: "There are still areas to work through but this announcement means that people no longer need to live in fear of being uninsurable and that those at most risk can get protection, now and in the future."