Ensuring You’re Insured

March 13, 2012

FoodIn the past three years, Australian communities from north Queensland to eastern Victoria have been ravaged by severe flooding. We have been shocked at images of families scrambling onto their rooftops, crowding into evacuation centres, and, eventually, shoveling mud out of their living rooms.

The cost of flood disasters can be devastating, not only because of personal tragedy and loss, but also in terms of property damage. Last year’s Queensland floods cost almost $1.5 billion. The recent NSW and Victoria floods will cost hundreds of millions of dollars. Many of the families whose homes, farms and businesses have been damaged and destroyed are discovering that they now face huge losses that won’t be covered by their insurance policies.

Home insurance policies frequently do not include any kind of flood protection, and even the ones that do are often less than satisfactory. Many flood victims have discovered that they are not covered by their insurance companies because of different definitions of “flooding”. Some contracts differentiate between water that enters through the doors or over the walls of a house. Other technicalities include whether policies cover flash flooding, riverine flooding, tidal flooding or flooding without rain in the immediate area.

In response to the 2011 Natural Disaster Insurance Review, the Federal Government has proposed the Insurance Contracts Amendment Bill 2011, currently under consideration by Parliament. Most significantly, the Bill provides for a standardized “flood” definition across the industry, providing a greater degree of certainty surrounding flood coverage. This is a much-needed reform for which the Government is to be commended.

Until such regulations are made, however, there is no standardized definition of “flood coverage”, and you should read the terms and conditions carefully before choosing your insurance provider. Insurance contracts are very exact in their scope, and if the flood protection you seek is not in the contract, do not presume that common sense definitions will apply. Your insurer is under no legal obligation to cover you unless the contract says so, so make sure you understand the definitions your insurer is using before entering into an agreement.

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