Need to know
- All home insurance policies offer cover for bushfire, but you should make sure your home and belongings are insured for the right amount
- Take into account extra costs, including demolition, debris removal and compliance with modern building codes
- Get familiar with your policy documents so you know exactly what you can claim for – and what you can't
In many parts of the country, bushfire season is starting earlier and ending later. The climate crisis is bringing us more intense drought and more days of severe fire weather. If your home is close to bushland, it's more important than ever to make sure your insurance is up to date.
Your local rural fire service has information on preparing your property for fire, but we can help you make sure your aren't left financially high and dry if fire hits your home.
Home and contents
All home insurance policies we review (and that's most of them on the market) offer cover for bushfire. This means you'll be covered up to your sum insured if your home is damaged or destroyed.
If you have comprehensive or third party fire and theft cover for your car, it will be covered if it's damaged or destroyed by bushfire.
Some home contents insurance policies cover vet bills if your pets are injured, either due to an insured event or accidental injury. Depending on your policy, you can claim between $500 and $2000 for vet bills. Some companies offer this cover as an optional extra, so if you want it, check with your insurer. Some insurers that automatically include cover might do so for their top-tier products only.
Alternatively, if you have a pet insurance policy with injury cover, it will cover your cat or dog for burn injuries and smoke inhalation.
Underinsurance is when the amount you insure your property for isn't enough to replace it, leaving you out of pocket or settling for a cheaper alternative. The best way to prevent underinsurance is to make sure your home and contents sum insured values are up to date.
Most insurers have a calculator you can use to estimate the replacement value of your property. You could also ask a builder for an estimate.
Don't forget about extra costs
Additional expenses such as demolition, debris removal, architect fees and the costs of complying with local regulations are usually included in home insurance policies – you might be able to claim a dollar amount or a percentage of your building sum insured to cover these.
Some insurers will cover these costs out of your sum insured amount. Others will pay for them above and beyond. Have a look at your product disclosure statement (PDS) or our home insurance review to see how your insurer handles them, and adjust your sum insured if you need to.
Modern building codes increase rebuild costs for at-risk properties
If you live in an older home in a fire risk zone, it might cost more to rebuild. This is because a replacement house will need to conform with new fire safety rules, introduced to the national building code after the 2009 Black Saturday fires in Victoria. One insurer has estimated that building a compliant home in the highest risk location could add $277,000 or more to the bill.
Make sure you know what your property's Bushfire Attack Level is and speak to your insurer or a builder about how this affects your house's rebuild cost.
If you're underinsured, you might not get enough from your insurer to cover replacing your property. Make sure your home and contents sum insured values are up to date.
Consider a safety net or total replacement policy
Many insurers offer an underinsurance safety net for building cover. Depending on the size of the safety net, you could claim up to 30% above your sum insured if the cost of rebuilding your home escalates. This can be useful if rebuilding costs go up in the wake of a natural disaster.
A few insurers also have a contents safety net, although these are not as generous, with a maximum of 25% above the sum insured.
One step above the safety net is a total replacement policy, which ANZ and AAMI offer. Instead of setting a sum insured, the insurer commits to restoring your building regardless of the cost – although these policies aren't always cheap, and a larger or better-built home will still cost more to insure.
Beware waiting periods
Many home insurers impose short waiting periods on cover for natural disasters such as bushfires, cyclones and floods. Waiting periods are usually 48–72 hours. They apply if you weren't previously insured, are upgrading your cover, or increasing your sum insured. The idea is to prevent people from staying uninsured until there's smoke on the horizon.
For example, if your policy has waiting periods and you increase your sum insured from $500,000 to $550,000, that extra $50,000 won't apply to bushfire cover until the waiting period ends.
Because the insurance industry doesn't use a standard definition of "fire", you need to know how your insurer defines it and – more importantly – what doesn't meet its definition.
For example, one major insurer excludes damage caused by "heat, ash, soot and smoke when your home or contents have not caught on fire unless it is caused by a burning building within 10 metres of the insured address". Definitions can be confusing, but it pays to get your head around them – you might find out your home insurance isn't actually suitable for you after all.
Also, consider cover for your outdoor belongings. Contents in the open air often have a lower level of cover than the rest of your possessions. Many policies don't offer fire cover for "contents in the open air", so make sure you read this part of your policy carefully.
To get the full picture of what you're covered for, there are three sections in most PDSs you should get to know:
- The glossary, which will give concise definitions of the terms in the rest of the document.
- The section on insured events, or "What you're covered for", which details what is and what isn't included in your fire cover.
- The "general exclusions" section, which lists things not covered at all by the whole policy, and which may have exclusions relevant to fire cover.
After you've contacted your insurer, they'll send someone to assess the extent of the damage. When your property is safe, take photos of all damaged belongings and buildings, as this will help the insurer process your claim. Prevent further loss by covering exposed contents with a tarp or putting them under shelter. Don't throw away any items unless they're hazards.
If your home is declared a total loss (i.e. it needs to be pulled down and rebuilt) your insurer will organise to have it rebuilt, or you can choose to receive your full sum insured as a cash settlement.
As for contents cover, some insurers offer store credit at one of their preferred suppliers, instead of a cash settlement, to replace damaged items.
More than half the insurers we reviewed let you nominate your own builder for a rebuild after fire, but they might retain the right to refuse if the quote is too high.
Getting by if you can't go home
Your home insurance policy includes cover for accommodation if your home is uninhabitable after an insured event. Depending on how long you need to be away from your home, this might be hotel accommodation or a longer term rental home similar to your own.
Depending on the policy, the amount you can claim will be 10–20% of your building sum insured, 12–24 months' rent for an equivalent property, or whichever is less.
State and federal governments also give financial assistance to people affected by natural disasters.
Some insurers also include $500–$2000 cover to replace refrigerated food and medication that spoils because of an insured event. You might also be able to claim this if your power cuts out, even if your property isn't directly affected by bushfire.
Who chooses the repairer?
That depends on your insurer. More than half the insurers we review let you nominate your own, but they might retain the right to refuse if the quote is too high.
Keep in mind that insurers have commercial relationships with builders and get cheaper rates than the rest of us. This means that if you take a cash settlement for a partially damaged building, your insurer might only offer you what it would cost them to repair your home, potentially leaving you out of pocket. Get your own quotes before choosing to go down this path.
- Assess whether your sum insured is still enough to replace your home and all your contents. Treat your insurer's calculator as a guide only, and consider getting an estimate from a builder.
- Find out what extra costs might apply if you have to rebuild.
- Keep a copy of your insurance documents in your evacuation bag.
- Upload photos of your belongings and scans of receipts to a cloud storage service to keep them safe.