How to make sure your insurance will protect you this bushfire season

For many property holders, the threat of fire damage is an ever-looming anxiety. The 2020 Black Summer bushfires, in which around 2,500 houses were lost, set a frightening precedent for owner-occupiers and investors alike.

In an era of increasing natural disasters, UNSW Business School’s Professor Michael Sherris is urging all property owners to ensure they have adequate insurance cover, especially in light of recent changes.

As Mr Sherris explained, just having fire damage insurance is not enough – it’s vital to ensure that home insurance is updated to accurately reflect the cost of a new rebuild, or property owners could risk being underinsured.

Key to getting adequate insurance is knowing what building codes your property complies with.

Mr Sherris shared: “Building codes were revised after the Black Summer bushfire event and, depending on the risk level of the property, this impacts the cost of replacement.”

”If your home’s cladding material, for instance, does not meet the building code requirements in your area, and in the unfortunate event of a bushfire causing damage to your home, necessitating a rebuild with cladding material compliant with the building code, you will incur higher costs. Your insurance company, in this situation, will typically not cover the higher cost,” he stated.

Or alternatively, the UNSW professor noted that if new code-compliant renovations were made post-2020, and the insurance company has not been notified of these, “you will be underinsured”.

At the end of the day, Mr Sherris stated the best thing property owners can do is to swallow the pill and pay for full insurance coverage.

“It may mean you might end up paying a higher price, but you will be covered for the upcoming bushfire season,” he stressed.

He warned that “a major challenge we see nowadays is Australians choosing not to have insurance because the cost may be considered too high,” adding that “the current cost-of-living crisis is not helping”.

Home insurance prices are also on the rise because Bushfire Attack Level (BAL), the metric by which insurance is calculated, is becoming higher as fires grow more severe.

Nevertheless, Mr Sherris asserted: “It’s critical for home owners to ensure they have home insurance that protects them from bushfire damage, especially if they live in a high-risk area.”

“Home owners may think that their property will be undamaged but may not be aware of the expected outlook this upcoming season,” he warned.