Flood Insurance

If you’re living in an area readily affected by flooding, or simply want to protect against the worst-case scenario, you should look at insuring yourself. Receiving cover for flood damage can save you thousands of dollars compared to not insuring yourself against this kind of water damage. Read on to find out more about flood insurance, how it works and why it might be the right option for you.

What is flood insurance and how does it work?

Flood insurance usually comes in the form of a built-in home, contents or home and contents insurance feature or as an optional extra available to be added to your policy. As you may expect, flood insurance provides coverage for damage caused to your property and/or belongings by flooding. Insurers will have a clear definition of flooding to determine what is and is not covered under their policy. In most cases, this definition will cover water escaping from its usual environment stemming from the sources listed in the table below.

In addition to this, most flood insurance policies will cover you for damage sustained as a result of rainwater runoff and flash flooding due to torrential rain, while you may also be covered for flooding that occurs as a result of a storm surge. Parts of your property and belongings that can be insured against flood damage are listed in the table below.

In terms of what you’re not covered for, this will vary quite significantly between insurers. Flooding caused by ocean activity, such as rising sea levels or larger waves, won’t be covered. If you have a basement or space beneath your property, it and the items stored within also may not be wholly covered under your flood insurance should it sustain damage. Additionally, any paperwork holding value, which is most at risk of being destroyed due to water damage, almost certainly will not be covered.

How are my flood insurance premiums calculated?

The most important factor that contributes to any addition to your existing insurance premium is flood risk. The primary resource used by insurers to determine a given property’s risk of flood exposure is through the National Flood Information Database (NFID). This database is responsible for providing information to insurers across Australia relating to the risk posed by flooding to over 10 million properties countrywide.

Flood insurance in Queensland is a perfect example of how much weather can influence insurance premiums. North Queensland, which is prone to extreme weather events like cyclones and storms, holds by far the highest home and contents insurance rates in Australia at more than double the average cost across the rest of the country. This can be almost entirely attributed to the weather, where the cost of cyclone and flood coverage distorts the price significantly.

While the NFID isn’t for public access, it’s not too difficult to determine how your flood risk can affect your premiums. If you live in relative proximity to a body of water (particularly downhill from one), are in a coastal area or live in a city or town with a history of flooding or other extreme weather events that could cause it, your insurance premiums are almost guaranteed to be higher. Additionally, if you’ve made flood insurance claims in the past, your premiums will increase. In terms of your property’s characteristics, the materials it was made with and the height of your floors will be taken into consideration, as will its slope.

It’s always wise to get a quote from Savvy when researching your different flood insurance options. Our advanced comparison tools contrast the best options on the market in the most important areas and can help you determine which plan suits your situation.

Should I take out a flood insurance policy to protect my home?

Maybe – depending on how much you’re at risk of suffering from flood damage. If you live in an area with no history of flooding and aren’t situated near any bodies of water, the chances are that your home and valuables aren’t at much risk of damage at all. This doesn’t necessarily mean that you shouldn’t look for flood coverage on your home and contents insurance policy, though. For those in this position who don’t feel that they’re at any risk of sustaining flood damage, it’s likely that you’ll be paying very little extra, or none at all, for added flood coverage. In this sense, it might not hurt to keep it tucked away for a rainy day.

If you’re living in an area that’s at greater risk of flooding, you should ensure that you’re covered for flood damage under your insurance policy. Even though it’ll increase your premiums, in some cases by a substantial amount, it’s always worth protecting your finances from being depleted due to funding repairs and replacements across the board due to water damage. No matter the cost, you should buy flood coverage if you’re at risk; the consequences could be dire if you don’t.