Does your home and contents insurance cover fire damage?

The destructive bushfires currently raging across Australia have reminded us of the devastating effects fire can have on individuals, families and whole communities.

At least 23 people are known to have died and more than 1,500 homes and over six million hectares (an area bigger than Belgium and Luxembourg combined) have been destroyed since the bushfire season began in August 2019.

The insurance industry reported there have so far been around 8,500 insurance claims – totalling approximately $700 million – lodged in relation to the bushfires since September. It is predicted this number will rise once power and mobile reception is restored to some of the devastated communities.

With the extreme bushfire threat set to continue across Australia, the Insurance Council of Australia (ICA) has urged homeowners to check if they have adequate insurance to cover them financially in the event their home or contents are damaged or destroyed by a bushfire.

The ICA has also activated its disaster hotline –  1800 734 621 – to assist policyholders if they are uncertain of their insurance details or if they have inquiries about the claims process.

Does your insurance include fire protection?

At the time of writing, all home and contents insurance policies on Canstar’s database include, as standard, a level of financial cover for loss or damage caused by fire, including bushfires and house fires. Canstar Research also found that 66% of policies on our database also cover damage caused by heat, ash, soot or smoke, when your home or contents have not caught on fire.

While you may find your insurance does provide a level of cover for fire, it could still be worth checking your policy’s Product Disclosure Statement (PDS) or contacting your insurer directly to determine what types of fires are included and if any exclusions or waiting periods apply.

What insurance is available for fire damage?

Home insurance

If you want to insure your home building, outbuilding or any permanent fixtures from damage or loss caused by a fire, then you may want to consider home insurance. This type of insurance is typically only available to those who own their own home. For those wanting to protect their contents while renting, it may be worth considering renters insurance.

Depending on the policy and level of cover chosen, home insurance may include cover for:

  • Repairing or replacing your home or permanent fixtures
  • Demolition and removal of debris
  • Temporary accommodation while your home is unliveable
  • Professional fees, such as for architects or surveyors

Read your policy’s PDS or get in touch with your insurance provider for more information about what is included in the cover and any exclusions that apply.

fire protection insurance
Home insurance may provide a level of replacement cover for your home building if it is lost in a fire. Source: Myszka (Shutterstock)

Contents insurance

If you want to insure your personal possessions such as furniture, appliances and electronics from damage or loss from a fire, then you may want to consider contents insurance.

Depending on the policy and level of cover chosen, this type of insurance may include cover for:

  • The repair or replacement of your belongings
  • Removal of your damaged items
  • Spoilage of perishable food or medicine up to certain benefit limits
  • Damage to or loss of guests’ personal possessions while they are visiting your property when the fire event occurred, up to certain benefit limits
  • Payment for moving or storage fees for your undamaged contents if a fire makes your home unliveable

Read your policy’s PDS or contact your insurer for more information about what is included in the cover and any exclusions that apply.

Home and contents insurance

For people looking to cover both home and contents from fire damage or loss, most insurers offer a combined insurance policy. Check the policy’s PDS for a list of inclusions and exclusions associated with a combined policy.

What is not covered?

There are a range of exclusions that may apply to your home and contents insurance when it comes to fire cover. Depending on your policy, these may include loss or damage arising from:

  • Heat, ash, soot and smoke when your home or contents have not caught on fire, unless it is caused by a burning building within a certain distance of your home
  • Electrical arcing, scorching, or melting where there were no flames, unless a fire spreads from the initial burn spot
  • Deliberate, malicious or criminal acts carried out by the policy holder and/or family members, or by guests to the house

There may also be exclusions surrounding items which are designed to be exposed to heat, such as cooking appliances or home heaters. If these items are damaged or destroyed during normal use, then cover may not be available to replace or repair them. However, if a fire starts from these items and that fire damages other items in your home or the home itself, then your insurance may provide a level of cover.

fire insurance options
If items designed to be exposed to heat, such as a dryer, are damaged or destroyed while in normal use then cover may not be available. Source: FCG (Shutterstock)

Is there a waiting period?

Most home and contents insurers include a waiting period, usually around 72 hours, from when you first take out the insurance to when you can make a claim, potentially leaving you unprotected if you were impacted by fire in this window.  Check with your provider to see if a waiting period applies.

What types of cover are available?

There are two types of home and contents insurance you can choose from – total replacement cover and sum-insured cover.

1. Sum-insured cover

Most insurers will operate on a sum-insured model. These policies will cover damage or replacement to your home or contents from fire up to a fixed value, set by you and your insurer.

In the event of a total loss from a bushfire, you may be left underinsured if the agreed amount does not adequately cover the cost of rebuilding or replacing your home and contents. It may be worth checking your insured amount to see if it is relevant to today’s prices.

Some insurers may also offer extended replacement cover, which will add a certain percentage of payment above the sum-insured amount. This may range from 10% to 30%. Extended replacement cover may be offered as an inclusion under your sum-insured policy, or as an optional extra for an increased premium.

2. Total replacement cover

These policies will typically cover the estimated costs to repair, rebuild or restore your home or contents to the state they were in before the damage or loss occurred from fire. To determine the sum owed to rebuild or repair, your insurer will typically need to do a full assessment of the damage or loss that has occurred. This type of cover generally carries a higher premium than a sum-insured policy.

Can I get cover if I live in a bushfire-prone area?

If you are living in a bushfire-prone area, such as near coastal scrub, rural grasslands and paddocks or in dense bushland, you could still get fire cover under home and contents insurance; however, there may be some additional considerations when assessing your insurance options.

Change to building codes

In 2010, following the deadly Black Saturday bushfires the year before, the national Building Code of Australia was amended, and several states followed suit by giving effect to these amendments in legislation. Properties in at-risk areas now have Bushfire Attack Level (BAL) ratings and must be built using specific designs and materials, such as gutter guards and window shutters. These new requirements can significantly increase the cost to rebuild your home if it is lost in a fire.

So, if you live in a bushfire-prone area, you may need to insure your home for more than its current price to account for the cost of implementing these building requirements. To do this you could consider a total replacement policy, or if available, add extended replacement cover to your sum-insured policy.

Increased premiums

Most insurers will factor in where your home is located when calculating your premium. Because living in a bushfire-prone area increases your risk of damage or loss from a fire, this will likely increase the premium you are charged. If you are not sure if your home is in a bushfire-prone area, check with your rural or regional fire service, or your local council or state government for details.

What to do when making a claim

If your home or contents are damaged or destroyed by a bushfire, contact your insurance company in the first instance to seek advice about the claims process and avoid doing any repairs unless you have written permission from your insurer.

It is also a good idea to take photos of any damaged contents or property  to use as evidence for your claim before you remove or throw them out. Also try to provide your insurer with as much information as you can regarding what has been lost or damaged from the fire, and answer any questions they may have truthfully.

How to make sure you have adequate fire cover

Having sufficient insurance could make a huge financial difference in the recovery process if your home and contents are damaged or destroyed by fire. To help ensure you have adequate fire cover, it may be worth considering the following:

  • If you have a sum-insured policy, check if the amount covered matches the value of your assets. To help in valuing your home and contents, consider using an online calculator, or contacting a professional valuer for your property or items. You can also complete an inventory of your contents by doing a room-by-room evaluation.
  • Carefully read your policy’s PDS to see what is covered and what exclusions apply. You can also speak to your insurer if there is any part of the policy you don’t understand.
  • If you think you may be living in a bushfire-prone area, check to see what building requirements are needed for your home in the event you need to rebuild, and consider factoring in these costs to your policy.
  • Shop around to try and find a policy that best suits your circumstances.

Reducing the risk of fire damage

You may be able to reduce the risk or impact of fire damage to your home by considering the following:

  • Prepare your home against bushfires, including cleaning out your gutters, sealing around doors and windows, maintaining your garden, storing fuel and other combustibles away from the home, or adding a sprinkler system to your gutters.
  • Install and maintain smoke alarms so when there is a fire at your home you can notify authorities immediately and evacuate the premises.

To help protect you and those who live in your home, it may also be worth creating a bushfire survival plan. It is also important to follow the advice of your local authorities before deciding whether to stay and defend your property or to evacuate.

Related: Bushfires to coronavirus: What is a P2 mask?

Cover image source: Daniel Taylor Producer (Shutterstock)

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