Flood insurance: how flood cover works in home insurance

The standard definition of flood

The definition is set in regulation 34 of the Insurance Contracts Regulations 2017 and applies to home building, home contents, combined home, strata title residence and small business property policies, whatever the policy wording says. It first became law in 2012 and became mandatory in June 2014 after a two-year transition, which means you can compare flood cover between insurers on the same terms. Moneysmart quotes it as the covering of normally dry land by water that has escaped or been released from the normal confines of any lake, river, creek or other natural watercourse (whether or not altered or modified), or of any reservoir, canal or dam.

Before the standard definition, insurers used their own wording and many consumers only discovered after an event that the water that entered their home was not flood under their policy. A common definition does not mean every policy covers flood; it means that when a policy says flood, it means the same thing.

Flood, storm, rainwater and other water

Water damage claims are assessed by cause. The table below shows how the main causes are usually treated, based on Moneysmart's guidance and typical policy structure.

How to check whether you have flood cover

Since November 2014, home building and contents insurers have had to provide a Key Facts Sheet in a format set by the Insurance Contracts Regulations, within 14 days of you asking about or buying a policy, and to publish the current version on their website. It includes a table showing whether each event, flood among them, is covered, not covered or optional. It is the quickest way to check a quote or a renewal. The PDS then gives the detail, including any sub-limits.

The Insurance Council of Australia describes four ways home policies offer flood: included as standard; included, with an option to opt out; excluded, with an option to opt in; or excluded. If you are offered a policy without flood, find out whether your address is actually in a flood-prone area before deciding.

How to check your flood risk

Flood information is held by councils and state agencies, and insurers use their own models on top. These steps get you from public maps to the rating your insurer uses.

• Start with your council. Councils hold most local flood studies and maps; the NSW Flood Data Portal notes that councils remain the main source of flood information.
• Check your state's portal. In NSW, the Flood Data Portal from the NSW State Emergency Service collects flood studies, though it doesn't hold every one. In Queensland, FloodCheck shows where flood studies exist and holds historic flood information, but says it shouldn't be used to determine flooding at the property level; for that, contact your council.
• In Brisbane, request a FloodWise Property Report from Brisbane City Council, which shows the flood types, likelihood and flood levels for an address.
• Ask the insurer which flood rating it gives your address and whether it takes mitigation work, such as raised floors, into account.

If insurers won't offer flood cover at your address

If the quotes you get exclude flood or price it out of reach, you still have options. An insurance broker can approach insurers you can't reach directly; the National Insurance Brokers Association's Need A Broker search lets you look for a broker by the type of cover you need.

For free legal advice about an insurance problem, including a refused quote or claim, the Financial Rights Legal Centre runs the Insurance Law Service on 1300 663 464. Keep evidence of any flood mitigation work, such as raised floor levels or flood-resistant materials, because it is what you'll need when you ask an insurer to reconsider its rating.

Why flood-prone homes cost more to insure

Premiums are set address by address, using flood models that estimate how often and how deeply water is likely to reach a property. Where the modelled risk is high, flood can make up much of the premium. Moneysmart notes that if your home is at a high risk of flooding, cover may be more expensive or flood may be excluded. Flood mitigation work by councils and governments, and property-level measures such as raising floor levels, can change an address's risk rating over time, so it is worth asking whether your insurer takes them into account.

Cyclones and the Commonwealth reinsurance pool

Since 1 July 2022 the Australian Reinsurance Pool Corporation has run a cyclone reinsurance pool backed by a $10 billion Commonwealth guarantee. It reinsures home and contents (including landlord), residential strata and small business property policies for cyclone damage and related flood, including storm surge and riverine flood, during a cyclone event period that runs until 48 hours after the cyclone ends. It operates Australia-wide but matters most in cyclone-prone northern Australia, where the ACCC's Northern Australia Insurance Inquiry found premiums were far higher on average than elsewhere. Its purpose is to lower reinsurance costs and so premiums. North Queensland residents can also use the government's North Queensland home insurance comparison website.

Making a claim after a flood

Photograph damage before cleaning up, keep samples of carpets and damaged materials if you can, and contact your insurer as soon as it is safe. Many insurers will arrange emergency repairs and temporary accommodation. Under the General Insurance Code of Practice, subscribing insurers must decide a claim within 10 business days of having all the information they need, and overall within 4 months, with up to 12 months allowed for an extraordinary catastrophe. They must update you on progress at least every 20 business days. If you disagree with a decision, use the insurer's complaints process first, then the Australian Financial Complaints Authority, which is free.