But what caused the water to damage your property?
What is a flood? You might think the answer obvious but take a close look at a few different insurance policies and you may find the definition is as clear as the mud still covering parts of Queensland.
No one is overjoyed when a natural disaster causes widespread damage, least of all those who have lost everything and been uninsured. But perhaps a close second on the unhappy list are the insurance companies whose job it is to make good on their commitments to those who have insurance. Hardly good for profits.
But what do we have insurance for if not to cover our financial losses when disaster strikes?
Unfortunately, as thousands of flood-affected victims have lately realised, it pays to ask questions before signing up to an insurance policy. Assume nothing.
In the eyes of the insurance companies, whether or not a claim is successful will depend on what ultimately caused the water damage to your home.
According to the Australian Securities and Investments Commission’s (ASIC’s) flood insurance guide, standard home and contents insurance usually only covers you for storm water damage, such as when a storm rips a hole in your ceiling that lets water in. Many insurance companies also cover for rainwater damage.
Importantly though, home and contents insurance doesn’t typically cover you for water damage caused by a river, dam, lake or natural watercourse overflowing. Such as the Brisbane River breaking its banks.
This means Toowoomba victims whose homes were damaged following a heavy storm that caused water to flood downhill, may have more success with their claims than the flood-affected residents of Brisbane’s riverside suburbs.
The words “water damage” in your policy do not necessarily mean you’re covered for flood damage. In fact, “flood damage” may be carefully hidden in your policy’s exclusions clause, often in fine print.
It’s confusing. Every policy is different and even a subtle change in the wording can make a big difference.
It’s hardly surprising that there is a call for an insurance industry shakedown. Many are demanding that a standard flood definition be incorporated into the Insurance Contracts Act. Other suggestions include providing more explicit information to consumers, and using plain English in policy wording.
In the meantime the advice seems clear; shop around before choosing a policy. Ask detailed questions about what is and isn’t included, and compare the wording in different policies.
The law says that insurers have to act in “good faith”. Their intentions must be honest. They can’t deliberately trick or deceive you, and must abide by what is stated in the policy. It will be interesting to see what legal battles ensue over the coming months for alleged breach of good faith.