MORE than half a million homes may be uninsurable next year because of inadequate flood defence spending announced in the pre-budget report.

The insurance industry had an agreement with the government to cover the 570,000 homes in high-risk flood areas until the end of 2008, but this has been brought forward to the end of this year, with an announcement expected by next March, according to the Association of British Insurers (ABI).

Under the agreement, insurers will continue to provide cover to existing customers in high-risk areas as long as sufficient money is spent on flood defences.

However, the chancellor, Alistair Darling, said in his budget statement last week that he would spend only £650m in 2008-09 - £150m less than the ABI believes is required.

“We have brought forward the review of the statement of principles in light of the pre-budget announcement,” said a spokesman. “Our members want to continue providing cover for homes, but we need government to continue the right level of investment in defences.”

After this summer’s damaging floods, which has resulted in an insurance bill of £3 billion, the insurance industry suggested that bills would rise.

Analysts have warned that homes at risk of flooding could fall in value by as much as 80% if they become uninsurable. Even where insurers continue to offer cover, they could hike premiums or excesses to such levels that properties are blacklisted.

The Royal Institution of Chartered Surveyors said: “Buyers need buildings insurance before lenders will grant a mortgage, so uninsurable homes could be rendered unsaleable. This will have a knock-on effect on the value of the property, leading to a reduction in value of up to 80%.”

Norwich Union, one of Britain’s largest insurers, has already increased premiums across the board by 10% because of the floods, although it denied there would be any further increases following the pre-budget announcement.

A report this year by the National Audit Office found that more than half of flood defences in Britain were in need of repair. The ABI said that its predicted £150 million shortfall for 2008-09 is likely to lead to more defences falling into disrepair.

Gordon Brown told the Commons that differences with the industry over spending were “very small” and that the government was doing everything it could to improve flood defences.

“I hope they [insurance companies] will not take the step to deny people insurance,” he said.

Environmental analysts Landmark advises potential homebuy-ers to check the risk of flooding before they make a purchase. The best way to do this is to ask your solicitor or conveyancer to get a report on the property.

Richard Mason, insurance expert at the comparison firm Moneysupermarket.com, said: “Stick with the big-brand insurers who are less likely to pull out of covering you if you have a flooding catastrophe. It is essential to shop around for cover that will suit your needs.”

You could also “flood proof” your home, which could cost up to £40,000 but may make it more likely that your insurer will not turn you down when your policy comes up for renewal.

Tips include replacing wooden floorboards with concrete and laying tiles rather than carpeting downstairs. You could also move plug sockets higher up the walls, and replaster internal walls with a water-resistant material. Finally, attach flood skirts and barriers to doors, windows and airbricks.

The Department for Environment, Food and Rural Affairs (Defra) has also launched a pilot scheme offering grants so people can improve their own flood defences. Defra has split £500,000 between six areas - Uckfield in East Sussex, Bleasby in Nottinghamshire, Morecambe in Lancashire, Halton in Leeds and Kirkby-in-Furness and Appleby in Cumbria.

Grants will be distributed in each area between households that the local authority or environment agency believe will benefit most from better protection.

HOW TO PROTECT YOUR PROPERTY

— Find out if you are in a flood risk area, call Floodline on 0845 988 1188 or visit environment-agency.gov.uk.

— Replace wooden floorboards with concrete and lay tiles rather than carpeting the downstairs of your property.

— Install one-way valves into drainage pipes to prevent water and sewage backing up into the house.

— Move plug sockets up the walls so they are above the likely water level.

— Replaster internal walls with a water-resistant material such as lime plaster or cement render.

— Attach flood skirts and barriers to doors, windows and airbricks. These are permanently fixed to the building, but need to be pulled or slid into position if there is a risk of flooding.

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