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Detailed bushfire insurance guide

This factsheet is for information only. It is recommended that you get legal advice about your situation.

PART 1:  HOW CAN I PREPARE IF I AM IN A BUSHFIRE PRONE AREA?

If you have not had any damage but you are in a bushfire prone area, take some time now to collect your insurance information and take videos and photos of all your property and contents. Save all of this information and evidence somewhere safe, such as on a Cloud service, where you can access easily if you need to evacuate.

It can be overwhelming and very difficult to itemise what has been lost after a bushfire, so taking a video or photos beforehand can really help you and the insurance company to process your claim more quickly.

You should also call and check that you have adequate coverage in the event of a bushfire. Will your home building sum insured cover the cost of a rebuild? You might want to consider getting a policy with an additional “safety net” amount in case building costs go up due to high demand for building materials or new building codes.

Keep in mind many policies will not cover you for bushfire damage if you have purchased the policy immediately before the fire. For many policies you cannot claim in relation to bushfire damage which occurs in the first 72 hours after you purchase the insurance, although for some policies the limitation is only 48 hours.

 PART 2: WHAT INSURANCE DO YOU HAVE?

If you have insurance, the damages and losses resulting from bushfires may be recoverable depending on what type of insurance you have and the extent of that cover.

Most commonly the policies you may have are:

  • Home Building Insurance covering destruction or damage to building;
  • Home Contents covering personal belongings and household possessions
  • Motor Vehicle Insurance covering motor vehicles, and in some cases motorbikes, trailers, caravans

If you think you may have insurance but you can’t remember which company it is with, ring the Insurance Council of Australia on 1300 728 228. When there has been a large scale disaster event there is usually also a dedicated Catastrophe Hotline 1800 734 621.

PART 3: CLAIMING

The first step is to contact your insurers and notify them about your claim. If you are unsure if your claim will be covered or not, you should claim and see what the insurer says.

NOTE:   Do not be concerned if your policy documents have been lost or destroyed, insurance companies keep records electronically and only require the policyholder’s name and address in order to process a claim. Your insurer is obligated to send you a copy and may have them available online.

IMPORTANT:   One of the first things you should look for is whether you are covered for the costs of temporary accommodation. More about this is found below in Part 5: Additional Benefits under your policy.

The insurer will appoint an assessor to come to your property to assess the damage and gather information to assess whether you are covered under the policy.  This may take time during catastrophes like bushfires.  You should in the meantime:

  1. Remember that your safety is the priority. Only enter damaged buildings if it is safe to do so. Always follow directions of emergency services.
  2. Next it is important to protect your belongings. You are required to take reasonable steps to prevent further damage. If you can secure your property from further loss, for example, putting a tarp over your contents if they are exposed or moving it under shelter. Try and document this with photos, invoices and evidence of any directives from council or local emergency services.
  3. Take photographs of any damaged items and buildings and start making an inventory of your loss;
  4. Do not dispose of any items unless you have to because it is a hazard – but before you do so, make sure you document everything and try to get the insurer’s consent

You should be mindful of your insurer’s rights to inspect your property or determine whether buildings or contents should be repaired/rebuilt/replaced and by who.  You should talk to your insurer to try and get their consent before performing works.

NOTE: Sometimes an insurer will ask you to make an inventory of damaged possessions room by room. However, if everything is lost you should ask them to just pay your total sum insured. If they insist on itemisation, ask for reasons why and seek advice.

There may be the possibility that some person or entity will be found responsible for starting the fire. If there is a possibility that, for example, a large company, or the government, may be found to be liable for the event, and your insurance is insufficient to cover all your loss, you may want to gather such evidence anyway just in case there is a court case, inquiry or other source of compensation.

If you are not sure what you are covered for, you should get a copy of your Product Disclosure Statement and Policy schedule and your Certificate of Insurance covering the date of the bushfire.

Insurance policies vary in wording from policy to policy as to the types of risks or insured events they will cover, and what events or losses are excluded. It is very important you read your policy and understand what you are covered for, this will help you in ensuring you get all of the benefits you are entitled too as well as explaining why you may not get all of your losses paid

Many insurance policies cover bushfires as an insured event. There may however be limitations on exactly what is covered and in what circumstances.

Common limitations are:

  1. bushfires within the first 48 or 72 hours of you first taking out the policy are not covered – though there can be exceptions (e.g. you just purchased or leased the property, or changed policies from another insurer without any break in the period of cover and for the same level of cover)
  2. damage from scorching, burn marks or melting are not covered where there has been no flame, or where there was no burning building within 10 metres of your home
  3. heat, soot, smoke or ash, unless your buildings or contents have caught on fire

The extent of your cover will ultimately depend on the wording of your particular Policy.

Many policies also impose a general obligation on you to take reasonable precautionary measures to prevent loss – for instance clearing your gutters to reduce the risk of leaves in the gutter catching fire from embers carried by the wind. This only requires reasonable measures – you should not risk your health or safety or disregard local planning laws.  What is reasonable can be argued about, especially if the fire was sudden or of unavoidable ferocity.

GOLDEN RULE: It can be difficult to work out what is covered by your policy so if the insurer rejects any part of your claim, get advice from the Insurance Law Service (1300 663 464 or website enquiry form here.)

Generally the insurer should make a decision on your claim within a maximum of four months, unless exceptional circumstances apply. Exceptional circumstances include where there has been an extraordinary catastrophe or disaster declared by the Board of the Insurance Council of Australia. In these circumstances the maximum time to make a decision on a claim is 12 months, but you may complain to the Australian Financial Complaints Authority (AFCA) at any time if you are dissatisfied with the progress of your claim.

PART 4:  WHAT ARE TYPICAL ISSUES TO CONSIDER IN BUSHFIRE INSURANCE CLAIMS?

REPLACEMENT OR INDEMNITY COVER

If you have indemnity cover, your insurance policy will generally cover you for actual losses up to the sum/s you are insured for.  If you have this type of policy, your certificate of insurance will state what amounts you are insured for – for instance “Up to $400,000 for building, $20,000 for contents”.  There may be limitations – for instance if you choose not rebuild but sell the land, your policy could say that your insurer may only pay the value of the property.

If you have a replacement cover, your insurer should cover you for the amount it would cost to replace or repair damaged building/contents to the condition it was in just prior to the fires.

For either, you may also be entitled to other Additional Benefits under the policy, see below.

UNDERINSURANCE

Underinsurance is a problem with indemnity cover, where the amount you are insured for is not enough to cover your loss or damage. This is a major problem particularly in times of natural disasters, as the cost to rebuild can easily rise due to the increased demand for builders and building materials. Costs can also go up if local building codes are changed.

Some insurers offer a safety net of protection, in return for you paying additional premiums, for instance: “Safety net home protection – 25% extra of the home sum insured”

Insurers are only obligated to cover you up to the amount you are insured for.

The reverse side of this is over-insurance is where you are insured for more than the amount required to cover your loss or damage.  Over-insurance can be one way of creating a buffer to make sure you are fully covered.  However you need to be aware that you will not be entitled to an automatic payment of this higher sum.  The insurer will only cover the amount of your actual loss, and you will not be entitled to any refund of the higher premiums you paid because you were over-insured.

CAN I HOLD THE INSURER RESPONSIBLE IF I AM UNDERINSURED OR OVER-INSURED? 

Generally no.  When you first take out a policy and at every renewal it is your obligation to review the amount of cover the insurer is offering to ensure that it meets your needs and expectations.

A renewal statement might read:

“Each renewal, we increase your sum insured to help keep pace with inflation and consequently your premium will increase. As always, you are free to choose a sum insured level which best suits your needs and we recommend you review the amount of your cover periodically, particularly if you have made changes to your assets.”

If you are not satisfied with the amount of cover you are offered, you can negotiate with your insurer or shop around other insurers.

If you feel you have been clearly misled by your insurer into getting too little or too much insurance get legal advice. If you relied on the insurer’s own sum insured calculator before taking out insurance you should get legal advice.

 

CASH SETTLEMENT OR REPAIR/REPLACEMENT

Often the insurer is entitled to make the decision as to whether to repair, replace or cash settle a claim. Sometimes they may ask you how you would prefer to settle, and you can try to negotiate.

You should be very careful before accepting a cash settlement offer. You should take the following into account in your negotiations:

  • If an insurer chooses to repair or rebuild, the insurer is responsible for the work. Insurers offer guarantees on the works they do. Also, they manage the repair process which can sometimes be complicated. There are also times that the repair costs are uncertain which means a cash settlement may leave you out of pocket. If you agree to a cash settlement and engage your own repairer, any problems arising from the quality of repair will be an issue for you to sort out with your own repairer.
  • Get your own quotes to make sure the amount being offered is fair and realistic. Quotes that the insurance company obtains may not be the actual cost to you to repair/rebuild/replace You need to think carefully to decide whether this sum will be enough before you agree to a final amount.
  • In contents claims, the insurer may pay your claim in store credit instead of cash – but only if the policy contains an express right to do this. If the policy is silent on a store credit you could ask for cash as an alternative. However, you should be aware that the insurer may reduce your cash settlement to a lower amount than the stated value of the store credit. Policies vary so get advice if required
  • You need to be clear on what you are settling, if it is the whole claim or only part of it eg. contents. You may have “Additional Benefits” on top of the amounts you are insured for building and contents.  Make sure you understand what you are entitled to under your policy.

REVIEWING YOUR CLAIM AFTER A CATASTROPHE

The General Insurance Code of Practice states that if you have a property claim resulting from a bushfire that is finalised by your insurer within one month of the bushfire, but you believe the assessment of your loss was not complete or accurate, you may ask your insurer to review your claim up to a year after finalisation – even if you have signed settlement or release papers.

MORTGAGED HOMES

If you have a mortgage over your home that has been damaged or destroyed the insurer may pay the amount of your claim directly to your home lender. In this case you will need to negotiate with your lender about the release of the funds for rebuilding or repair. If there is a problem with this process you should get advice about your options.

SHOULD I HIRE A CLAIMS MANAGEMENT SERVICE TO HELP ME WITH MY CLAIM?

You may be considering using an insurance claims management business – a for-profit  service that will represent you for a fee, and do the leg work on your insurance claim. Before you decide to sign up to one of these business – you should understand the risks involved and consider the alternatives.

If you are considering engaging one of these services, read our fact sheet first: Insurance Claims Management Services

PART 5:  ADDITIONAL BENEFITS UNDER YOUR POLICY

There may be additional benefits under your home building and/or contents policy which may cover you for emergency/alternative accommodation, removal of debris and demolition, architects, surveyor and legal fees etc.

These additional benefits can be in addition to your sum insured. Therefore, before agreeing to any settlement of your claim, it is important that you check to see if you are entitled to more than your sum insured through the existence of additional benefits cover.

EMERGENCY/TEMPORARY ACCOMMODATION

If you can no longer live in your house, you should contact your insurer and check your policy to see whether you have temporary accommodation entitlements and for how long.

An example of a clause to look out for to determine whether or not you are covered for temporary accommodation is:

“We [the insurer] will pay the reasonable costs incurred by you for comparable accommodation for up to 12 months while your building is being rebuilt or repaired.”

THINGS TO CHECK FOR IN YOUR POLICY

In relation to temporary/emergency accommodation, insurance policies vary. Examples include:

  • Limitations on cost:
    • Specifically stating a percentage (e.g. 10%) of the value of the policy for which your insurer will cover you for in relation to temporary/emergency accommodation;
    • Providing that your insurer will pay for “reasonable costs”
  • Limitations on length of time:
    • Some policies provide for a specific time period within which you will be able to claim in relation to such emergency accommodation;
    • Providing for a “reasonable time”

WARNING: Watch out for your insurer putting you in an expensive temporary property which will use up your accommodation allowance too quickly. If it is going to take 12 months to rebuild your home you will need a sustainable housing arrangement.

DEMOLITION AND/OR REMOVAL OF DEBRIS

The costs to remove debris from your property and clear your land can be significant.

You need to carefully check what types of “debris” are covered.  For instance, debris from trees, shrubs and plants may not considered “debris” under the policy.

For example, your policy might state that you are covered for the reasonable cost of Removing buildings and contents debris from your risk address”

However, “trees, shrubs and plants” might not be considered “buildings or its contents” in the definitions section.

Reading a policy can be difficult, and you should contact us for specific advice if you need assistance.

ARCHITECTS, SURVEYORS AND LEGAL FEES

Most home building insurance policies provide additional cover for the costs of the services of architects, surveyors and legal fees in rebuilding and/or repairing damage to buildings.

If you are unsure whether you are covered for these, check to see if you have a clause in your policy similar to the following:

“We will pay the reasonable costs of architects, surveyors and legal fees when damage or loss occurs. We will pay up to 10% of your buildings sum insured.”

COSTS OF COMPLYING WITH NEW REGULATIONS

After significant events like bushfires, sometimes local councils will impose new regulations and fire safety standards for bushfire prone areas. New regulations may also have been introduced since your home was initially built.

Whether you are covered for these costs depends on your policy.  An example of a clause to look out for is:

“We will also pay any additional costs required for your buildings to comply with government or local authority by-laws.”

It is likely that you will be covered for additional compliance costs if your policy is to replace your property “as new” or if you have “total replacement cover”.

URGENT FINANCIAL NEED

The General Insurance Code of Practice obliges your insurer to fast-track your claim if you are in urgent financial need (Clause 7.7a) and to make an advance payment within 5 business days of you satisfactorily demonstrating your urgent financial need (Clause 7.7b). Any advance payment will be deducted from the total value of your claim.

There may also be emergency payments available through the Federal or State government if your family has been affected by a bushfire. You should also contact your lenders immediately as they can offer financial hardship arrangements.

PART 6:  WHAT CAN I DO IF MY CLAIM IS REFUSED, OR IF THE CLAIM IS TAKING TOO LONG?  HOW DO I RAISE A COMPLAINT?

You can raise a dispute with the insurer’s internal dispute resolution department (“IDR”). You can obtain these details from:

You should gather as much evidence as you can and provide copies to your insurer.  If your insurer is relying on expert evidence, you should consider obtaining your own independent expert report to support your dispute.

You can also consider court proceedings, however you should speak to a private solicitor for advice first as court is risky and you may be made responsible for the insurer’s legal costs.

PART 7: GETTING LEGAL ADVICE

You can call the Insurance Law Service on 1300 663 464 on Mondays through Fridays between 9:30am to 4:30pm (Sydney time).  If you cannot reach us on this number you can also contact us through our website inquiry form available at insurancelaw.org.au  We also have many other factsheets available there, including on delay, claims refusals, and excesses.

OTHER LEGAL SERVICES THAT MAY BE ABLE TO ASSIST ARE:

  1. Legal Aid in your state
  2. In NSW Law Access have a dedicated bushfire number: 1800 801 529
  3. In Vic legal Aid have the Disaster Legal Help Victoria 1800 133 432 Private Solicitor
  4. Contact your local Law Society for a referral or Justice Connect in NSW and Victoria for pro bono support.
  5. If you are a tenant affected by the bushfires either from having your possessions burnt or your rental property damaged or destroyed, please contact a Tenants Union in your state or territory for tenancy advice. NSW residents may contact Law Access on 1300 888 529 for a referral to your nearest Tenancy Advice and Advocacy Service.

PART 8: KEEPING ON TOP OF FINANCES

DO YOU HAVE A MORTGAGE OR OTHER LOANS?

You should contact your lender immediately to ask for hardship assistance.  This is most commonly provided in the form of reduced or postponed repayments, usually for 3 to 6 months at a time.

When catastrophes happen, some lenders may offer even more generous assistance and you should explore that avenue as well.

If you do not do anything, not paying your loan/s pending the outcome of an insurance claim will result in additional interest and enforcement fees being added to your loan and may result in legal action.

GENERAL FINANCIAL COUNSELLING AND  LEGAL ADVICE

If you are having problems reaching an agreement with your lender, you can contact the National Debt Hotline on 1800 007 007 for financial counselling and/or legal advice, or a referral to your nearest face to face financial counsellor and community organisations and charities that can provide assistance including food and emergency accommodations

There are also services such as the No-interest loans scheme (NILS) which can provide loans to low income earners on an interest free basis to pay for essential household items such as whitegoods.

DO YOU HAVE OTHER DEBTS – WATER, RATES, ELECTRICITY, PHONE BILLS?

All utility companies and telecommunications companies have hardship policies, and can provide assistance by reducing or postponing your repayments. If you are experiencing difficulties negotiating with your provider you can contact the Telecommunications Industry Ombudsman on 1800 062 058 or www.tio.com.au for telecommunications or the Energy & Water Ombudsman in your state.

NEED SOME MORE HELP?

See Fact sheet: Getting help for a list of additional resources.

Last updated: January 2020