Having your home damaged or destroyed in a natural disaster is devastating. While these events are usually impossible to predict, one thing you can control is your insurance.
While insurers generally cover storm damage, the level of cover varies. Unfortunately, some people find that their claims will not be paid and end up paying the repair costs themselves. Flood cover is not offered in most home and contents insurance policies.
If you already have home and contencts insurance, check:
- - If you're covered for storms, floods and flash floods and how the insurer defines each event
- - How much you're covered for - ask what is and isn't covered if you're not sure
- - If your cover is enough as repairs can cost more than you think
- If you're not happy with your current level of cover, talk to your insurer and see what they can offer. You can also shop around for a policy that's better suited to your needs.
Floods and Cyclones
January and February 2011 saw many parts of Australia impacted by flooding and Cyclone Yasi.
If you have been affected by a flood or cyclone and want to know what you should do about home insurance you should:
- - Contact your insurer to lodge a claim. Do this before you start any major repairs.
- - Take photos before cleaning up and make a list of everything that has been damaged to assist in the claim process.
- - Consider removing water and mud-damaged possessions. Carpets and soft furnishings can be removed from the building as part of the clean up.
- Don't worry if you're insurance documents have been lost or damaged due to the flood as insurance companies keep records electronically. You can ask your insurer to send you a copy of your policy.
Wherever you live, your home insurance needs to be enough to cover the costs of rebuilding your home. This is particularly important if you live in an area prone to bushfires.
One person who lost their home in the Canberra bushfires in 2003 and who thought they had enough insurance told us: "We now have a mortgage of $140,000 when we owned our home outright before." And it is estimated that 13% of homes that require reconstruction or significant repair from the 2009 Victorian bushfires were not insured.
Risk of Underinsurance
You are considered to be underinsured if your insurance covers less than 90% of the rebuilding costs.
You could be underinsured because:
- - It's hard to estimate what it costs to rebuild a home
- - Your insurance policy may be old (more than 3 years) and you may not have updated the level of cover needed
- - You may have completed renovations which increase the value of your home
- When working out how much cover you need, consider the possibility that your whole house could be destroyed, for example, by a bushfire or other natural disaster.
Policies with the lowest risk of underinsurance are 'total replacement' policies, where the insurer agrees to pay unlimited replacement costs.
Whatever type of home insurance policy you may have, there is always a risk of underinsurance. The golden rule is to get enough cover for the worst case scenario.
Contact us for more information.
(Downloaded from the ASIC MoneySmart website)