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Ensuring You're Insured Over an Unpredictable Summer

With predictions estimating that La Niña will persist in the southern hemisphere until autumn 2022, Australians are in for a summer like no other! With a forecast of record-breaking weather on the horizon, it's crucial that you ensure you're insured over this unpredictable summer.

Australia's weather is influenced by many climate drivers. In 2021, you will have heard the terms El Niño and La Niña fairly regularly – they have the strongest influence on year-to-year climate variability for most of the country. In particular, La Niña events increase the chances of above-average rainfall for northern and eastern Australia during spring and summer.

Earlier this month, the Bureau of Meteorology declared that La Niña was officially underway in the Pacific Ocean, and Australia began feeling its impacts almost instantly! With predictions suggesting that La Niña will persist in the southern hemisphere until autumn 2022, Australians are in for a summer of record-breaking and potentially very dangerous weather. The last significant La Niña event that tore through Australia saw Australia’s wettest two years on record, and resulted in widespread flooding, the severe tropical Cyclone Yasi, and the devastating Brisbane floods of 2010-2012. Yikes!

A Brief History of Australia’s Unpredictable Summers So Far

The Australian Institute for Disaster Resilience reported that the Brisbane floods impacted 75% of the state and caused $2.38 billion in damage. Unfortunately, for the thousands of people who lost their homes and had their possessions destroyed in the floods, many insurance policies didn’t provide coverage for damage caused by flooding, which meant that policyholders were not insured for their destroyed homes and lost belongings. On the other hand, many of those who did have flood cover in their policies were still underinsured, because their building ‘sum insured’ amount was lower than the estimated cost to rebuild their home. 

The 2019-2020 Australian bushfire season, known as Black Summer, was yet another devastating weather event that destroyed thousands of homes, burnt millions of hectares of land, and was responsible for the deaths of many Australians. Karl Sullivan of the Insurance Council of Australia stated that “the bushfires had cost the industry $2.4 billion,” and ranked it as one of the top five disasters in terms of insurance claims in Australia’s history. Despite fire being classified as an insured event, many Australians were again underinsured and didn’t have adequate cover for their home and contents. 

What is Home Insurance? 

In simple terms, Home Insurance will cover your home and/or its contents in the event that they are damaged or destroyed as the result of an “insured event” In Australia, there are three types of Home Insurance available: 

Building Insurance

This covers the building and its fixtures. 

Contents Insurance 

This covers personal belongings. 

Building and Contents Insurance

This covers both the building itself and its fixtures, as well as personal belongings. 

How Do You Ensure You’re Adequately Insured? 

In the event that the unthinkable happens, domestic insurance plans are used to help people get back up on their feet. Unfortunately, as mentioned above, many individuals are unaware that even though they do have insurance in place, they are underinsured. In a study conducted by MCG Quantity Surveyors, it was found that a whopping 83% of Australians had underinsured their property. 

Home insurance covers your home and/or contents if it is damaged or destroyed due to an ‘insured event’. Cover will vary between insurers, but it generally covers events such as:

  • Fire
  • Lightning 
  • Theft 
  • Storm 
  • Earthquakes 
  • Explosions 
  • Impact damage (such as from a car or a falling tree) 
  • Escape of liquid (from a burst pipe) 
  • Vandalism 
  • Riots 

Optional extras can also be added to home insurance policies. Some of the optional extras that can be added on include: 

  • Flood 
  • Accidental damage
  • Motor burnout  

To ensure you’re adequately covered and have the right insurance policy in place to suit your needs, we recommend carefully checking your Policy Disclosure Statement, or asking your insurance broker for clarification and recommendations for optional extras.  

What Are the Types of Policy Covers Available? 

There are two types of policy covers available: 

  1. Total Replacement Cover 
  2. Sum Insured Cover 

Total Replacement Cover

Total replacement cover includes all the costs to rebuild your home to the standard it was before the event that triggered the insurance claim. 

However, it’s important to note that most insurance policies only cover a policyholder up to a set financial limit. This is known as the sum-insured and represents the maximum value of your policy. Total replacement policies are usually more expensive than sum insured policies. 

Sum Insured Cover

Sum insured policies will reimburse you for the value of your building and your possessions in the condition that they were in prior to being damaged or stolen. It is important that you choose the right sum insured for your property and contents because it represents the maximum amount your insurer will pay in the event of a claim. Should the worst happen, such as a total loss to your home, and you have undervalued your assets, you may have to pay the difference between your sum insured and the rebuilding costs. 

Your home insurance sum insured should reflect what it would cost to rebuild your home using the same materials, fixtures and fittings. The cost to rebuild your home is different to its real estate market value, because it does not include land value. 

Here at BlueRock General Insurance, we ensure you have enough insurance to cover replacement and supplementary costs. We use an online calculator, Cordell Sum Sure, to provide you with the estimated cost to rebuild your home. 

As we all know by now, Australian summers can be very unpredictable. We strongly recommend that you review your insurance policies annually so they are current, relevant, and protect all of your assets. For an obligation-free review, please get in touch with our Melbourne-based BlueRock Domestic Insurance team so you can sit back and enjoy your summer knowing that you’re well protected! 

Please note that the information provided in this article is general in nature and does not take your individual circumstances into account. 

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