Australia markets closed

Bushfire insurance claims: Everything you need to know

(Source: Getty)

Thousands of Australians forced to evacuate their homes have returned to find it burnt to the ground or badly damaged.

Insurers have been actively assisting Australians in Victoria, NSW, South Australia and Queensland with their insurance claims since early September, according to the Insurance Council of Australia. And more than 6,000 claims have already been lodged, with that figure expected to climb.

Here’s what you need to know about the kinds of insurance policies that cover your property in a bushfire, what happens if you’re not insured, and whether premiums will go up.

What kind of insurance policies covers my property in a bushfire?

According to Insurance Council Australia spokesperson Campbell Fuller, home and contents policies as well as comprehensive motor vehicle policies will cover your property in the event of a bushfire.

In the best case scenario, you will have chosen an insurance policy with full coverage – that means you can entirely rebuild your property and factors in things such as demolition and clearance.

According to the Financial Rights Legal Centre (FRLC), the most common policies you might have are:

  • Home Building Insurance covering destruction or damage to building;

  • Home Contents covering personal belongings and household possessions

  • Motor Vehicle Insurance covering motor vehicles, and in some cases motorbikes, trailers, caravans

  • Life Insurance covering injury, disability and/or death. It may be a stand-alone policy through a life insurer or as part of your superannuation benefits. If you have life insurance through your super, some policies will cover you even if you are no longer employed.

  • Accident or sickness policies, income protection and consumer credit insurance can also cover you if you are ill or injured or unemployed. Income protection can be stand-alone or as part of your super.

What if I’m under-insured?

According to Fuller, underinsurance may mean you have not chosen a policy that covers you enough to rebuild everything you want to the same or higher standard.

For instance, a fire-affected property owner might have taken out $300,000 as their nominated cover amount – but it will cost $350,000 to rebuild the house to the same way it was before.

But there is an alternative, said Fuller. 

“They need to compromise on what their replacement house looks like. Insurers are not able to tell people how much insurance they need to have.”

What if I don’t have insurance?

For those who find that a bushfire is at their doorstep, Fuller has bad news: it’s too late and you’ll be unlikely to be able to buy an insurance policy now.

“Insurance is there for the unexpected and the unknown. It’s not there for people who know that they’re going to need to make a claim,” he said.

If the fires are in your area, insurers will likely have in place a restriction on new policies in your region, a normal and accepted practice in the insurance industry.

“Areas that are being hit by bushfires or are under stress by bushfires are probably experiencing embargoes on new policies,” said Fuller.

Can I get emergency accommodation?

That will be outlined in your insurance policy – many, but not all, policies will cover for this. If you aren’t sure, get in touch with your insurer to check if you might have temporary accommodation entitlements and for how long.

According to the FRLC, here’s an example of a clause you can keep an eye out for:

“We [the insurer] will pay the reasonable costs incurred by you for comparable accommodation for up to 12 months while your building is being rebuilt or repaired.”

How do I work out how much insurance I need?

Many insurers provide free calculators that can help people figure out how much cover they need. 

The Insurance Council of Australia offers their own independent contents and calculators, which can help property owners work out if they’re underinsured.

If you believe you’re underinsured, you can contact your insurer and adjust your level of insurance. 

Not sure which insurance company you’re with? The ICA run a 24-hour hotline at 1800 734 621 which can help you find your insurer, assist you with general insurance information or provide information about managing your claim or how to lodge a complaint.

Will my insurance cost more depending on which state I live in?

The cost of your insurance can differ according to which state you live in. 

For instance, residential property owners in NSW tend to pay between 35-50% in taxes on their household insurance, which is more than three times what those in the ACT pay at roughly 10 per cent. All of this adds up on top of the base premium of your insurance policy.

This has resulted in greater numbers of NSW property owners being under-insured, said Fuller.

(Source: The Impact of Government Duties on Household Insurance report, November 2019, the Insurance Council of Australia)

What type of insurance do I need?

If you’re thinking about protecting yourself from future losses, understand the type of insurance policy you’re getting, all the relevant risks, and what you want to be covered for. 

“The rule of thumb is if you own something that you value, then you should consider insuring it. Insurance is available for just about anything you own,” Fuller said. 

More than just your home, contents and vehicle, you can get insurance for your farm machinery, fences, vineyards and orchards, and more.

Insurers will perform what is called risk-based pricing, which assess elements such as natural hazards, when and how the property is built, the materials used, the risk of something happening to the building, and the cost of rebuilding. All of these things are factored into your premiums.

To get a preliminary understanding of buying insurance for their home, the ICA has an app called MyHazards which helps you understand weather-related and natural disaster risks that can affect your home or business.

By keying in your address, the app will pull government data that gives you a summary of the potential risks your home or business could face. 

This kind of information typically won’t be provided to you by your landlord, real estate agent or even local government, Fuller said.

Is climate change pushing my insurance premiums up?

Fuller said that there isn’t a ‘climate change component’ to any insurance policy.

Rather, what will happen is that risks to any given area may change and are then reassessed by insurers, which in turn are reflected in premiums every year.

The potential good news is that where risks decrease, premiums will go down.

How long will it take for my bushfire-related insurance claim to be processed?

The ICA has declared the current bushfire season as a catastrophe, and insurers are prioritising claims made by those who have lost their property to the blazes.

However, there is no universal timeframe in which insurers can complete a claim, said Fuller, who said that the matter was “complex” and involved “many factors” with bushfires still burning across millions of hectares and access being restricted.

“Property owners may not be able to get back into their homes and insurance staff may not be able to access them. That’s causing some delays,” said Fuller.

“Repairing a damaged home will be different to rebuilding a whole new property in a remote corner of NSW.”

Once access is granted, insurers can start work at the property level, such as having discussions about site clearance and consulting with the property owner on their rebuilding or repair plans.

And then all the standard building processes need to be undertaken, such as getting a permit from the government and go through the necessary regulatory processes.

Insurers have been active since early September, and in some areas repairs area already underway.

Tips for making your bushfire insurance claim

According to Fuller, here’s what you should and shouldn’t do if your property has been damaged by the bushfires:

  • Listen to emergency services active in your area. Don’t return to your property until it’s safe to do so.

  • If you know you’ve suffered a property loss, you can still contact your insurer even if you haven’t seen the full extent of the damage. You can let them know what you need and about the fact that you’ll be lodging a claim soon. They will give you guidance on what they need from you in order to make the claim move more quickly.

  • When it’s safe to return to your property, take pictures and make lists of what’s been damaged. If something’s repairable, put it aside. 

  • If you’ve got badly injured animals, there’s no need to wait for the assessor: you can euthanise them humanely. Just be sure to have the relevant documents and evidence available so you can prove you have suffered financial losses. “You still need evidence something has been damaged or destroyed,” said Fuller. This is particularly relevant for primary producers who are potentially dealing with thousands of badly injured livestock.

  • Keep notes of your correspondence with your insurer by taking notes of your conversations, noting down the claim number, and asking for the names of all the people you deal with so you can be in touch with them should the need arise.

Now read: How to make a bushfire insurance claim

Do you have any other burning questions about bushfire insurance claims? Let us know at jessica.yun@yahoofinance.com and we’ll endeavour to get them answered.

Make your money work with Yahoo Finance’s daily newsletter. Sign up here and stay on top of the latest money, news and tech news.