Flood Insurance 101

[Author – Tim ODwyer]

WHY is flood insurance not universally available to homeowners?

The reason, according to the Insurance Council of Australia (ICA), is that insurers believe that not enough has been done to reduce the risk of flood in many communities.

This telling comment came from an ICA brochure entitled Flood insurance: Are you covered? This and further information on flood insurance can be obtained from ICA’s website: www.ica.com.au I actually found a copy of the brochure on a rack in a School of Arts hall.

According to ICA, if your property is near a watercourse or is low-lying, it could be flooded in the future. To find out if your house was in a flood prone area, ICA advised to start with your local council. Many councils have historic records of flooding and some have used new technology to determine where floods are predicted to occur.

If councils can’t help, ICA recommended homeowners ask their State Emergency Service, Local Water Authority, neighbours, local conveyancers, solicitors and, wait for it, insurers.

ICA suggested they may be able to assist you to find out if your property was in a flood prone area. Reading between the lines, the message was that insurers will know your property is flood-prone if they won’t give you flood cover.

ICA’s brochure otherwise detailed how insurance companies approached different types of water damage. Home-owners were warned that their home building and contents policies might not cover flood damage caused when bodies of water such as rivers, dams and other watercourses overflowed and covered normally dry land.

ICA said insurers included cover for flash flooding in home and contents policies but there may be some limits on this cover.

Flash flooding occurs after intense bursts of rainfall over a short period of time causing rivers, creeks and other watercourses to quickly overflow and then subside.

According to ICA, flash flooding was common in Australia and can cause significant property damage because of the speed with which it can occur.

ICA said some insurers will cover all types of flood damage in their home building and contents policies, often charging additional premiums, but those flood insurers may not offer cover in highly vulnerable areas. Storm damage was covered by all household policies, although some policies may exclude cover for damage caused if a window or door was left open or if a building was in poor repair.

Damage caused by urban drainage overflow (when gutters and stormwater drains in urban areas become blocked) was usually covered by home building and contents policies.

Finally, the ICA brochure gave this general advice: “If you think your property could be exposed to any type of flooding you need to check with your insurance company to see if your existing policy covers you for flood damage.”

Your policy should tell you what your insurance company will cover you for. You will only be compensated if those particular events occur.

General insurance is an extremely competitive industry. The type of cover offered or the specific wording used in policies will vary between individual insurers as they tailor their products to best suit their customers’ needs.

That is why it is very important to read the terms and conditions of the policy closely and ask any questions of the insurer if there is something you don’t understand.

– From PropertyReview.com.au

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