Cyclone Debbie and the deluge that followed was disastrous for large swaths of QLD and NSW. Severe floods caused widespread damage to thousands of properties, including residential strata.
In the aftermath of a flood, many depend on their insurance to help recoup their losses, however more often than not, people are distressed to find their Strata Insurance policy does not cover damage as a result of flood.
Here we address the ins and outs of flood cover, and whether you can include flood cover within your Residential Strata Insurance policy.
1. How is flood defined?
In the past, different insurance companies all had their own definition of what constitutes ‘flood’ in their policy wordings. However, in 2012, the Insurance Council of Australia (ICA) introduced a statutory definition of ‘flood’ for insurance contracts.
The main objectives of the legislation were to standardise the scope of cover, as well as reduce consumer confusion around what constitutes flood. The introduction of a standard definition since 2012 has ensured greater clarity and peace of mind for both property owners and insurers.
The standard definition of flood is:
The covering of normally dry land by water that has escaped or been released from the normal confines of:
- any lake, or any river, creek or other natural watercourse, whether or not altered or modified; or
- any reservoir, canal, or dam.
Reference: Section 37B (2) (a) of the Insurance Contract Act 1984 (Cth).Insurance Council of Australia, 2012
2. Does this definition apply to all insurance contracts?
Generally the flood insurance definition applies to a number of different insurance policies including Strata Insurance, Home and Contents Insurance, Car Insurance and Business Insurance.
3. Misconceptions of flood cover
Despite the introduction of a standard flood definition, we still find that many individuals are unsure of what constitutes flood when it comes to a claim. Below we have outlined two examples to help put the flood definition into context:
a) Flood example
If water escapes or overflows e.g. from a lake or water course, it is deemed in the insurers eyes as a flood. In this instance, your Strata property would only be covered for resultant damage if you have purchased flood cover as an additional feature under your Residential Strata Insurance policy.
NOTE: A standard definition for flood does not automatically mean flood cover is included in your Residential Strata Insurance policy.
b) Storm damage example
A storm accompanied by extremely heavy rain and high winds passes through, dislodging roof tiles at a strata property. As a result, rainwater permeates into the plaster of the ceilings and walls of several strata units, causing severe water damage.
The resultant damage here is deemed to be a consequence of the storm and not a flood, therefore it would always generally be covered under a Residential Strata Insurance policy (subject to terms and conditions specific to your policy).
NOTE: Generally, storm damage is a policy feature under Residential Strata Insurance policies, however please refer to your Strata Insurance Policy Wording for the exact terms and conditions specific to your insurance policy.
4. What does flood insurance cover include?
Generally, in a Residential Strata policy, flood insurance will provide cover for the building structure and any fixtures and fittings in Common Property areas where flood has been deemed as the cause of damage.
5. Can I get flood cover for my Residential Strata property?
Strata Insurance policies do provide storm damage cover but generally do not automatically provide flood cover.
Flood cover can be requested by the Owners Corporation, however insurers will assess their willingness to offer flood cover based on the location of property, and the proximity of rivers, lakes and dams. Generally insurers will refer to flood mapping to understand whether the area is prone to flooding. This information helps insurers determine if they are able to provide flood cover under the Strata Insurance policy.
If flood insurance is granted, this extension of cover will likely attract an additional premium.
Some insurers do automatically include flood cover under their Strata policies, however if the insurer believes the property is in a flood prone area, they will generally not provide the automatic cover.
Please bear in mind that some insurers do not offer flood cover under any circumstances. It is important therefore, if you do want flood cover, and are willing to pay an additional premium for this feature, that you select a Strata Insurer who can offer this policy feature.
For more information on flood insurance, or to ask about including flood cover for your Residential Strata property, first check your current insurance policy coverage, and then contact your Strata Manager, Insurance Broker or Insurer to make further enquiries.
As specialist Strata Insurance advisers, Whitbread can help, contact us on 1300 424 627 or via email, firstname.lastname@example.org.
This insight article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 Licence Number: 229092 trading as Whitbread Insurance Brokers for further information or refer to our website.