Does your insurance policy really cover you for natural disasters?

For those of us living in ‘the lucky country’, sometimes we have to wonder if we’re just lucky to make it through life without encountering a significant natural disaster. Blazing bush fires, rushing flood waters, storm damage that can include hailstones the size of tennis balls: some of these happen simultaneously across our vast landscape.

At least we’ve got the comfort of being able to insure ourselves against the damage. Haven’t we?

After the 2010-11 floods in different states, it turned out that neighbours affected by the same flood damage were treated differently, depending on their insurance policy. The Australian Treasury carried out an insurance review in 2011 after noting that:

‘People with insurance policies with one definition of “flood” received compensation while people living next door, with a different policy and different definition, received nothing at all… Many families and individuals affected by the 2010 and 2011 floods were not even aware their insurance did not cover flood.’

The review introduced a standard definition of a flood, created a flood risk information portal, and released fact sheets to help people better understand policies and make informed decisions about which ones to choose.

Even with all this work on making flood insurance more consistent and easier to understand, it’s still important to know exactly what your insurance policy covers when it comes to natural disasters. The geographical location of whatever is being insured may affect the kind of cover you get.

What kinds of natural disasters might affect you? How likely are you to suffer the effects of flood or fire damage? Are earthquakes on the cards? Perhaps volcanoes aren’t so much of an issue, unless you have property in New Zealand. Are cyclones counted as just a really big storm, or do you need separate cover if you live in tropical areas? (And are cyclones only a tropical risk?) Does storm cover include cover for hail damage?

Munich RE looks at the different types of natural disaster risks around Australia and New Zealand. Insurance education website, Know Risk, has information on what to look at when considering a policy, including the potential disasters that might affect you and questions to ask when assessing a policy.

Given the destructive rounds of disasters striking Australians this summer, it’s a good time to take a good look at those clauses in your insurance and make sure you’re properly covered for the types of disasters for which you are most at risk.

If you would like to speak with a professional personal finance adviser about how your finances and appropriate insurance for your property and income for the year ahead, contact United Global Capital today on 03 8657 7640 or email [email protected] for a no cost, no obligation consultation.

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