01.Checking your cover
With the bushfire season off to a frightening start, now is a good time to review some keys facts about fire insurance cover. The main thing to know is that it’s a standard inclusion for most home and contents insurance policies, but there’s generally a waiting period of at least 72 hours before you can make a claim.
If you’re potentially in the path of fire and don’t have insurance, be sure to ask any insurer you talk to for the details on how long you’ll have to wait before the cover takes effect. And get the answers in writing, not just from a company rep over the phone. If your home is at immediate risk and you’re uninsured, it may affect your ability to make a claim. Ask any prospective insurer for their policy on embargo periods in writing and keep a record of their responses. It's also worth checking that the fire cover in your policy definitely includes bushfires and other associated natural disasters, as well as house fires.
If you are insured, double-check how much you’re covered for. Many insurers operate on a sum-insured model that sets a specific limit on how much you will receive, regardless of how much it costs to rebuild. You are underinsured if your insurance covers less than 90% of the rebuilding costs.
It’s not easy to know how much it will cost to rebuild, but what is clear is that the cost of rebuilding is always going up. If you haven’t had a good look at your level of cover in the last three years, you may well be underinsured – especially if you’ve renovated your home or it contains valuable contents such as jewellery or art collections.
In addition, rebuilding in the wake of a natural disaster can be more expensive because access to the site is more difficult and building services are in high demand.
The best way to prevent being underinsured is a total replacement policy, which covers the cost of rebuilding at current prices. Currently, these insurers offer total replacement cover:
- Australian Unity
Another option is extended replacement cover, which adds a certain percentage of payment above the sum insured amount. These companies offer cover ranging from 10% to 30% on top of the sum insured amount, either as an inclusion or an optional extra:
- Budget Direct
- St. George
It’s also important to know that the federal government has tightened the eligibility requirements for its Disaster Recovery Payment scheme. People who have been injured or seen their homes destroyed will have access to the funds, but it will take longer for those unable to return to their homes or experiencing power shortages to get financial relief.