Home insurance and natural disasters: 7 ways a policy can protect you
How to make sure you have adequate cover for extreme weather events.
The impact of the devastating flooding in New South Wales this week again highlighted the challenges many people have with underinsurance.
Sadly, the recent flood events have led to many being priced out of home insurance where they live. Others will be worried about whether or not they have enough cover in place.
When it comes to insurance, here are some key policy features to be aware of:
Not all home insurance policies automatically cover damage from flooding. Start by looking for mentions of "flood" in your policy to see if you're covered. Or you could give your insurer a call. If you don't have flood insurance, ask how much it would cost to get it added.
In recent years, some insurers have introduced a green-friendly benefit known as environmental upgrades cover.
Essentially, if you need to rebuild your property after a disaster, you can get an extra $2,500 from your insurer to help pay for the installation of new energy-efficient systems. Examples can include installing solar power, a rainwater tank or a grey water recycling system.
You can also boost energy efficiency in your home contents, should they get damaged and need to be replaced. For example, QBE Insurance will pay up to $500 if you opt to upgrade your replacement washing machine to one with a better energy star rating.
New for old contents
If your personal belongings have been damaged beyond repair, some contents insurance policies – but note, not all of them – will provide you with a new equivalent item in place of your old TV or laptop, regardless of the age of your previous one.
This policy feature, known as new for old contents cover, can protect you against the depreciation of important items around the home.
If the worst happens and you need to evacuate your home due to an extreme weather event, insurers can foot the bill for a hotel or other accommodation for you, your family and your pets.
Most policies offer emergency accommodation cover as standard. However, the way it works can vary between providers. Some insurers will organise a hotel booking on your behalf. How long you can claim for may also vary – it's often up to 30 days or so.
Damage from mould
You could be able to claim for mould damage after a flood – but, it must have resulted directly from the insured event. In other words, the mould must be due to the damage immediately caused by, for example, flood water entering your property. If the mould has been left to grow over time, unfortunately you won't be able to claim.
Read our guide with tips for preventing mould growth in your home over winter.
Several insurance policies will pay up to $500 towards refrigerated and frozen food if they get ruined, such as after a power outage following severe weather.
With food spoilage cover, any no-claim bonuses you've built up with your insurer won't usually be affected after a claim. Also, your prescription medicines can be covered under some policies.
Total replacement insurance
According to the Insurance Council of Australia (ICA), some 83% of homeowners and renters in Australia are underinsured. Underinsurance basically means a policyholder insures their home for less than its true value.
A key way to get peace of mind against underinsurance is with total replacement cover. With this policy feature, your insurer is effectively promising to cover the entire rebuild of your home after a flood, storm or fire event.
ANZ is the only brand to include Full Building Replacement as a standard feature across all home and landlord building insurance products.
What else should I know about underinsurance?
One of the main drawbacks of total replacement cover is its cost. It can be very expensive, so most home insurance policies don't include it as standard.
Instead, most insurers ask you to select how much you want to insure your property for (known as the "sum insured").
Finder home insurance expert Gary Ross Hunter explained: "Trying to accurately predict how much it would cost to rebuild your home is really tricky – but there's a few things you can do."
"Make sure your policy includes debris removal. Specifically, make sure it says it covers 'Up to 10% or 20% of your home sum insured in addition to your sum insured'.
"Say your home is insured for $1 million. This means your insurer will cover you for an additional $100,000 or $200,000 for debris removal. That's typically how much it can cost to clear your home of debris and rubble if it's totally destroyed."
Hunter added: "Lots of insurers let you add a sum insured safeguard on to your policy as well. This is a safety net that can provide up to an additional 30% of cover on top of your sum insured if your home is destroyed.
"It basically means if you underinsure your home, this can make sure you're not thousands out of pocket."