Essential guide to flood cover

Many Australians became aware of the need for flood insurance after the 2011 Queensland floods, one of the most serious floods in Australia in recent times. A major flood can cause devastating damage to the family home and other properties.

If you’re in a flood-prone area and you’re not already insured for floods, this guide outlines what you should know about flood cover and how to find a great deal to ensure you and your family are protected by insurance in the event a flood does strike your area.

Flood cover in a snapshot

Flood cover typically includes coverage if your property and/or its contents suffer damage due to rainfall that causes waterways near you to overflow or due to water escaping various waterways other than the sea. Flood cover will range depending on the policy or insurer. Some insurers do not offer flood coverage at all and have been known to decline coverage for high-risk properties.

The extent and nature of flood coverage will range from insurer to insurer. For some policies, it’s automatically included in home and contents insurance, strata title, or even vehicle or business insurance policies.

As with any insurance policies, the more likely the area will flood, the higher the premium for flood insurance will usually be.

• Compulsory or default flood cover – For some insurers, flood insurance is a compulsory part of the home and contents insurance policy. This is usually due to the area of the property and the associated risk of flooding. Other policies include it by default but will give you the option to remove it if you want to opt out.
• Fixed limit – Some policies will specify flood coverage for up to a fixed limit, such as $20,000.

Storms and wind damage

Policies that don’t include flood cover will usually still include coverage for damage such as that caused by storms, hails, winds, snow, cyclone, rainwater. In these cases the damage comes from rainwater straight from the sky or the impact of storms, rather than from waterways. Some policies will also still provide other types of water-related damage, such as those due to leaks from swimming pools, pipes, and appliances.

Insurance definition of flood

For the purpose of making claims, a fixed definition is very important, and understanding the definition as a policyholder assists you with being clear about what you’re covered for. Under Australian law, there’s a standard definition of flood for insurers that applies to home and contents, small business, and domestic strata-title insurance policies. This definition has been interpreted ‘flood’ to mean “the covering of normally dry land by water that has escaped or been released from the normal confines of:

• any lake, or any river, creek or other natural watercourse, whether or not altered or modified; or
• any reservoir, canal or dam.

Always check your policy disclosure statement and speak to your insurer if you have any doubts about what you’re covered for.

What about storm surge insurance?

Storm surge insurance is generally excluded from flood insurance, and it typically refers to offshore rises of seawater due to low-pressure weather systems such as cyclones. For example, when there’s a high tide and the surge hits the coast, properties near the coast can experience damage.

Do you need flood insurance?

As much as 13% of properties in New South Wales will be flooded at some time. The risk of flooding depends on a range of factors including proximity to waterways, development projects, roadworks, and nearby agricultural development. Risk levels can also be affected by changes to river and creek catchments, the presence of levees and flood barrages, and any changing drainage and sewer arrangements. Many local councils offer flood awareness maps for their local area, and these maps can be helpful if you’re trying to work out your property’s risk of flooding.

You can also check your property on the Australian Flood Risk Information Portal, which has been developed by the insurance industry and state and territory governments to provide a central location for sharing flood risk information among communities, planners, and insurers.

Getting a good flood insurance deal

Floods can cause rapid and devastating damage. If you think your property is at some risk of flooding, you’ll probably benefit from having flood insurance cover. Because it’s sometimes an automatic inclusion for home and contents, business, and other type of insurance, check your policy and clarify with your insurer to see if you’re already covered.

There are two features to keep in mind when it comes to natural disasters like flooding.

• Total replacement policies – With a total replacement policy, the insurer repairs and rebuilds your home so it’s the same size and standard as your home before the damage.
• Sum-insured extended policy – A sum-insured extended policy offers a safety net – which might be 30% – plus the amount you’re insured for. This means if your property is totally damaged and your insured amount is not enough, you’re also paid this additional amount.

If you’re looking for a good deal, be clear about exactly what is covered in any flood insurance policy. Ask your local council for information about flood risk, and speak to a reputable insurer that can assist you with more information about policy features and coverage.