Flood Insurance: Flood Cover for Home Insurance

About Flood Home Insurance

If you are a homeowner in Australia, then it can be important for your peace of mind to know that your property is covered in the event of a natural disaster, and flood insurance could be a big component of this. Flood cover can be complex, however, and even if you do have home insurance, you may not be covered for everything you think. Here’s how you can find out, and what you can do to make sure you’re covered.

What is flood insurance?

Flood insurance is a particular type of insurance that is intended to cover property owners from damage caused by what an insurer defines as flooding. Whether or not your home is covered for damage caused by a flood depends on a number of factors. These include the type of home insurance policy you have, and what is included or excluded in that policy. Flood cover could be:

• A standard inclusion, which means it is included in the standard features of your policy for no extra charge.
• Available as an add-on feature, which means that you would have to ‘opt in’ for that type of cover and pay an extra fee.
• A notable exclusion, which means that it is not part of your policy and you cannot add it on.

If flood cover is a standard inclusion, your insurance provider might even allow you to ‘opt out’ to lower your home insurance premiums.

Does flood insurance cover all types of floods?

Even if you do have flood cover as a component of your home insurance policy, you may not be covered for everything that you think. Different insurance providers may use different terms to explain what they will and won’t cover in relation to floods, which can cause confusion when comparing policies, or when trying to figure out what you’re personally covered for. Your exact level of coverage will depend on your provider and policy.

Some providers specify limits on flood damage coverage, meaning the amount you’re reimbursed by as the result of a successful claim may not cover the full cost of repairing the flood damage to your house.

If you are unsure about what your current home insurance policy – or a new policy you are considering – covers in relation to flooding, check the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the details, or speak to your provider to clarify what is and isn’t covered.

If you are renting and have contents insurance, you may want to check whether your policy provides cover for flood damage to your belongings, and if there are any coverage limits. Again, you can read the PDS and TMD for details. While it will generally be your landlord’s responsibility to ensure the building you live in is covered by either their landlord insurance or by the body corporate’s strata building insurance, this policy will not cover your personal belongings.

Is my home covered for flood damage?

When it comes to determining what is and is not a ‘flood’ for the purposes of home insurance, the place the water came from is likely to make a difference. To give you an idea of what’s generally available across the market, Canstar Research looked at the home and contents insurance policies on our database and found that the vast majority covered damage caused by ‘rainwater runoff’. Other events commonly covered as standard included:

• flash flooding due to heavy rain
• natural water course (e.g. river, creek) flooding
• flooding due to release from catchment area (e.g. a dam).

Only a small portion of policies offered standard cover for flooding due to a storm surge, while none included cover for flood due to a rise in seawater, or for tidal flooding, at the time of the review (July, 2022).

Things become slightly more complex when damage is caused by the flash flooding of rivers, creeks, drains or heavy rains. In the event of flash flooding, the source of the water seems to be what’s important to insurance providers. Where flooding or damage is attributed to a storm, another question providers may ask is how soon after the storm the flooding occurred. Even if your home and contents insurance doesn’t cover flood damage, you may still be covered for damage caused by storm damage or water damage.

It’s important to read the important information provided by your insurance provider, and to clarify what is and is not covered in the event of any type of water damage.

Can you add flood cover to your home and contents insurance?

If your insurance policy does nor include flood cover as standard, you may be able to add it as an optional extra, either by updating your policy through your insurance provider’s online portal, or by contacting them directly. If you do this, there are a few things to keep in mind – firstly, the cost of your premiums is likely to increase, and secondly, the cover is unlikely to kick in immediately, meaning you’ll need to wait for a certain amount of time (an exclusion period) before being covered. If you are considering adding flood cover to a home insurance policy, then it’s important to confirm any relevant exclusion period with your provider.