Extreme Weather Events: Are You Covered?

As Australia has seen a rise in extreme weather events, such as our Black Summer bush fires and major flooding, some homeowners may be finding out too late that their cover was insufficient. How can you make sure you’re protected should the worst happen?

Last month, the Insurance Council of Australia (ICA) declared an insurance catastrophe, after more than 5,000 claims were lodged in a single weekend, following extreme rain and flooding across Sydney and broader New South Wales. Tragically, some of the communities affected were still recovering from last year’s bush fires.

With extreme weather events in Australia seemingly likely to rise, it’s more important than ever to make sure you are adequately covered for natural disasters. It’s also important to understand how much coverage you’d really need to fully repair and recover, as this is often underestimated.

Do you live in a disaster-prone area?

If you are unsure how at-risk the property you own, or are considering buying, is, you should talk to your local council or an emergency services organisation in your state or territory. You can ask about flood mapping, historical flood records, and the Bushfire Attack Level (BAL) of your home. Your council should also be able to tell you if your home meets natural disaster standards.

What are you covered for?

Most Home and Contents insurance covers you for damage caused by fire, including bushfire. However, generally, a flame needs to cause the damage, which could mean you’re not covered for heat-related damage (such as scorching and melting or smoke, ash and soot damage), if your home is damaged by a nearby fire.

Common exclusions from fire insurance can include:

  • A bushfire that occurs less than 72 hours after you bought your policy.
  • Fires that are intentionally set.
  • Accidental fires caused by negligence or recklessness.
  • If your house doesn't comply with fire regulations; for example, if a heater isn't installed properly.

MostHome and Contents insurance alsocovers storms. This typically includes damage caused by lightening, cyclones, strong winds, rainwater, hail, and snow.

With some policies, however, cover for damage caused by floods is optional. Even if you do pay for flood cover, many policies have exclusions, such as rainwater entering your home due to a structural defect, faulty design or poor maintenance.

Know your cover

Exclusions such as the above illustrate why it’s so important to read your policy’s Product Disclosure Statement (PDS). However, these can be lengthy and often confusing to the layperson, which is where insurance brokers, like the team here at IAS, can help and provide advice. We can help you identify your home’s coverage needs and risks, including making sure you are adequately covered to repair and rebuild if needed.

Are you underinsured?

Unfortunately, too many Australians find out that they are underinsured for full repair and recovery only after a disaster has happened.

If you live in a disaster-prone area, it's worth considering what’s known as 'total replacement cover' with your home insurance. This covers whatever it costs to repair or rebuild your house to the same standard. It's generally more expensive but means you're less likely to be underinsured. However, many insurers only offer 'sum-insured cover'. This is an estimate of how much it would cost to repair or rebuild your house.

To avoid being underinsured with sum-insured cover, check if your insurer offers a 'safety net' or 'safeguard'. This means that they will add up to 30% to your sum-insured amount in the event of a total loss. Also check your policy or ask your insurer about claim limits or ‘caps’. These are maximum amounts for repairing damaged items and therefore the total amount you can claim.

If you have been affected by the recent floods, Service NSW can help you access servicessuch asfinancial help, clean-up options, mental health support and more.
Use theDisaster Assistance Finder to locate flood recovery services near you.

Please speak to us if you need help working out if you are sufficiently covered in case of a fire, flood or other disaster.Call(02) 8268 2900 for an obligation-free chat.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Please consider whether the information is appropriate to your circumstance before acting on it and, where appropriate, seek professional advice.