From Money Magazine, August 2007
Extensive storm damage in NSW and Victoria recently caused more financial harm than necessary to quite a few people, because while home owners had insurance, their cover was not adequate. They won't be able to claim for the damage and will have to find money for the repairs themselves.
While insurers generally cover storm damage, the level of cover varies from insurer to insurer, says the Australian Securities & Investments Commission (ASIC). For example, it might depend on how the water got into your home. Some insurers will pay only if the water enters through an opening in the wall or roof caused by the storm, not if it seeps or percolates through the walls or ceilings, as might happen in an intense storm.
Others might be a little broader and will only not pay a claim if the water entered through an opening in the wall or roof made in the course of renovations by you or through a door or window you left open.
Flood damage is a bigger problem, as it is often an exclusion in home and contents policies. "As flood cover is not offered in most house and contents insurance policies, people may find out too late that they are not covered for the losses caused by a flood," says ASIC. "Floods occur when rivers, creeks, lakes, dams, reservoirs and other natural water courses (even if modified by humans) burst their banks or overflow. Floods may be also be caused by storms and heavy rain."
The key is to find out about any exclusions to your policy before it's too late. If you're in a vulnerable area, find out if you are covered for storms, floods and flash floods and check how much you're covered for. Some policies limit the amount for damage from flash floods.
If you live in a flood-prone area, it's vital to have adequate cover for flood damage because the repair bills can be huge.
Your local council can be a good place to check whether your area is flood prone. If it is and your existing insurer can't help you, shop around for an insurer that can. And ASIC has some words of advice: "Insist on getting the policy in writing before you buy, because you need time to understand and compare the wording of different policies to make sure you get the right protection."
Read the policy thoroughly, as is the case with any insurance. "Never buy flood insurance over the phone without reading the policy first," says ASIC.
For the complete story see Money Magazine's August 2007 issue. Subscribe now.
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