The Property Pack

Insurance Ideas

The Lesser Known Flood Insurance Claim Denial Loopholes

Flood insurance coverage is typically included as part of home and contents insurance policies. However, the extent of flood coverage and the terms and conditions may vary among insurance providers. 

The cost of insurance premiums reflects the flood risk, with higher-risk properties paying more. Insurers evaluate flood risk using the National Flood Information Database (NFID) which overlays property addresses with Government flood mapping data. NFID helps insurers determine premiums based on flood risk, building type, location and claims history. Even if flood damage is excluded, storm or rainwater damage may still be covered, depending on the policy. 

Australian regulations have standardised the definition of flood for home, contents, and small business policies to make the claim process easier. However, we all know how hard it can be to understand the fine print, and loopholes seem to pop out of nowhere when you least expect it. 

Flood coverage – what’s in and what’s out

Many home and contents insurance policies in Australia include coverage for flood damage as a standard feature. Typically, this is coverage against damage caused by the overflow of rivers and creeks, as well as heavy rainfall and flash flooding. The key though is that while most policies offer flood coverage, the level of protection and the definition of what constitutes a flood may differ among insurance providers. Certain high-risk areas prone to flooding, such as properties located near rivers, may have restrictions on coverage.

North Brisbane plumber John Salmon has been in the industry for many years and founded Salmon Plumbing in 1991. As a seasoned plumber with over three decades of experience, he’s encountered numerous clients who've faced challenges understanding the fine print in their insurance policies, particularly when it comes to flood insurance. Understanding the different types of flood insurance and their exceptions is crucial for homeowners. Flood insurance policies often contain intricate details hidden in the fine print, and it's essential to decipher them to ensure adequate coverage.

Some insurance providers don’t pay if the damage is caused by:

  • failure to maintain or service leaks, faulty valves, broken pipes 
  • unlicensed contractors undertaking non-compliant work.  

Act to ensure your flood insurance claims are not denied. Failing to address known issues promptly or neglecting routine maintenance like keeping your stormwater drains clear could result in claim denials. Homeowners need to be proactive in addressing potential risks and maintaining their properties to avoid such situations. 

Damage caused by unlicensed or non-compliant work may also be excluded from coverage. Due diligence is needed to ensure you always engage licensed and fully insured contractors for any construction or repair work to ensure that insurance policies will cover any damages resulting from the work performed.

Always read the fine print

It can be time-consuming and confusing, but taking the time to properly understand your policy is important. Where unclear, ask specific questions. As a policyholder, you may have the option to tailor your coverage based on your individual needs and the flood risk associated with your property. It is also important to note that the Government has implemented initiatives to improve access to flood insurance and assist homeowners in high-risk flood areas. 

Always lodge claims promptly and make sure that you’ve supplied the insurer with all information required. In the event that your claim is denied, it’s your right to request a review of the decision.

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