Isn't a cyclone a storm? Well, sort of.
With cyclones raging in Queensland and heading south, it's a good time to revisit a few home insurance basics.
In general, your home insurance policy won't specify whether you're covered for cyclone. It will instead say whether you're covered for Flood, Storm, and Actions of the Sea – events that occur as a result of a cyclone.
However, all the policies we analysed in our most recent home insurance review include storm cover – and a cyclone, of course, is a type of storm.
Check the Key Facts Sheet
Even with some of the recent improvements we've seen in home insurance disclosure documents, there's still plenty of room for confusion.
ANZ's home insurance Key Facts Sheet lays out some typical cyclone-related exclusions, especially relevant to those thinking of getting insurance in the midst of a cyclone.
Embargo period: "Excludes loss or damage caused by a flood or named cyclone that occurs within 48 hours of the start date of your Policy."
Storm surge: "Excludes loss or damage caused by a storm surge except where it happens at the same time as a flood."
Actions of the sea are also often excluded: "We do not cover action by the sea unless the loss or damage is the result of a tsunami."
This excerpt from Suncorp's website is a good example of what insurers cover when it comes to cyclones:
"A cyclone is a type of storm. Suncorp Insurance covers loss and damage caused by most types of storm (including a cyclone) and flood e.g. rain, wind, hail, storm and damage caused by flooding from rivers, streets and canals.
Damage caused by storm surges is also covered if it occurs at the same time your home or contents are damaged by a storm or flood.
The main things we don't cover are loss or damage caused by actions or movements of the sea and storm or flood damage to wharves, jetties, pontoons or retaining walls."
Want to find out quickly what you are and aren't covered for? Find the Key Fact Sheet on your insurer's website (mandatory as of November 2014). It'll be the most readable version of events that are and aren't covered.
What about "storm surge"?
In insurance speak, storm surge is an offshore rise of water caused by high winds pushing on the ocean's surface (typically a tropical cyclone or hurricane). Neither ANZ nor Suncorp, for instance, cover storm surge in isolation.
But if a flood or storm occurs at the same time as storm surge and inflicts the damage and you're covered for flood (see below), you should be covered.
ANZ gives the following example: "The flood definition makes reference to lakes, rivers , and natural watercourses – so as an example water escaping from these (like a river) and covering normally dry land would be deemed flood. If it happens at the same time as the storm surge, any damage or loss to contents and buildings would be covered."
What's a flood?
It's also an opportune time to review the official definition of "flood", which must be included in the insurance contracts of all insurance companies by July 2016. Many providers have already updated their disclosure documents with this definition.
According to the regulations passed in the wake of the devastating 2011 Queensland floods, the word "flood"now means "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 any reservoir, canal, or dam".
Prior to this mandated wording, insurance contracts defined flood in a number of different ways, often leaving homeowners confused about whether they were covered or not (and many found out the hard way that they weren't).
Storm runoff and flash flooding, on the other hand, do not meet the definition of "flood", though many insurance policies cover these events.
With Marcia and Lam bearing down, homeowners should note that "actions of the sea"are also excluded from the standard definition of flood.
New insurance industry rules
The 2011 Queensland floods also brought about a few critical updates of the General Insurance Code of Practice that are currently in effect:
- A four-month deadline for accepting or rejecting a claim unless there are extenuating circumstances, including "extraordinary catastrophe or disaster as declared by the Insurance Council Board";
- A 12-week deadline for reports by external experts, such as hydrology reports; the sharing of these reports with policyholders; and an explanation of how they affect claims decisions if requested;
- Enhanced employee training so that company staff can "carry out their claims handling tasks and functions competently and deal with customers professionally", with a focus on understanding a policyholder's particular circumstances;
- A new "right to claim"says insurers "will not discourage you from lodging a claim, even if we are of the view that it is unlikely to be accepted".
In addition, the industry committed when making the updates to releasing Code Compliance Committee reports that would list any significant breaches of the code by insurers.