It’s vital to understand what events are covered by insurance when it comes to protecting your business, home and livelihood from natural disasters.
The last thing you want to deal with while going through a crisis, is finding out you don’t have enough insurance.
With the most recent bushfire season causing untold damage and loss of life, it has brought into focus the need to assess your risk of impacts from fires, floods and other disasters. It has also highlighted another kind of crisis in Australia – underinsurance.
At the time of writing, there have been 28 lives lost, 2,600 homes gone, insurance claims of $1.34 billion and counting, one billion dead animals and an inferno that has stretched more than 25.5 million acres.
Early estimates from the Insurance Council of Australia suggest that fourth-fifths of claimants in this bushfire season may find themselves without enough payout to rebuild their homes. It is estimated that around 50% of Australian householders underinsured.
The cost of underinsurance means that many people will not be able to rebuild, leaving rural communities vulnerable to further decline as residents leave. This can undermine social cohesion as rural communities lose key people and services.
According to reports, the latest bushfires could end up costing about $2 billion for the Australian insurance industry, in addition to almost $1 billion for the wet weather events such as hail, cyclones and floods.
What you can do
One of the first steps in assessing your risk is to identify if you are in a disaster-prone area. This helps you choose coverage for the events that are most likely to happen to your home or business.
You can do this by contacting your insurance company, your local council and an emergency services organisation in your state or territory.
Ask them about flood mapping, historical flood records, and the Bushfire Attack Level of your home or business.
Check if you’re underinsured
You’re underinsured if your insurance doesn’t cover all the costs of rebuilding your home or replacing its contents.
It’s important to remember that the costs of rebuilding after a natural disaster can increase due to the need to meet current building codes to protect from future disasters and higher demand in affected areas for builders and supplies.
You can use a home insurance calculator to work out your rebuilding costs – the more details you input, the more accurate the calculations will be.
Check if your insurer offers a safety net on your policy, which adds 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 the total amount you can claim.
The most important factor is to fully understand storm, flood and fire insurance to check if you have enough insurance to rebuild and repair your home.
Understanding storm and flood cover
Most home insurance and contents insurance covers storms. This includes damage caused by lightning, cyclones, strong winds, rainwater, hail and snow.
Rainwater is usually defined as water that falls from the sky. Cover usually includes damage caused by rainwater run-off and rainwater that overflows from stormwater drains.
For some policies, cover for damage caused by floods is optional. For example, floods caused by overflowing streams, rivers, creeks and dams due to rainfall or a rise in the water level.
If you’re not sure what cover you have, ask your insurer or read your policy’s product disclosure statement
Understanding fire cover
Most home and contents insurance covers you for damage caused by fire, including bushfire.
Generally, a flame has to cause the damage. This means you’re not covered for heat-related damage, like scorching and melting, or smoke, ash and soot damage. For example, if your home is damaged by a nearby fire or bushfire.
Common exclusions from fire insurance include a bushfire that occurs less than 72 hours after you bought your policy; intentional fires; and accidental fires caused by negligence or recklessness.
What to do after a natural disaster
1. Talk to someone qualified and experienced about your situation. They can explain the options available to support you.
2. When it’s safe to do so, take photos or a video of your property. Make a list of all the damage, including as much detail as possible.
3. After you’ve assessed the damage to your property, speak to your insurance provider. They’ll check what your policy covers you for and help you make a claim.
The National Insurance Brokers Association can put you in touch with an insurance broker who will volunteer their services for bushfire claims — call 1300 53 10 73.
4. Take safe and reasonable steps to prevent any further damage to your property and belongings. For example, covering damaged roofs to prevent further water damage. But check with your insurer before making any repairs to your property. Your insurer may need to authorise repairs and tradespeople before they happen.
5. Speak to a financial counselor and find emergency, crisis support or legal advice if needed – many of these services can be accessed for free.
6. Let your lender know you have been impacted by a natural disaster. Their financial hardship teams will have a range of ways they can help you if you’re finding it hard to make loan or credit card repayments.
Contact us today for confidential advice on the best insurance options to protect your home or business from natural disasters.
General Advice Warning: The content of this article is general advice only and should not be acted upon without first consulting an industry specialist as it does not take into consideration your personal needs, objectives or financial circumstances.
