Floods and Flood Insurance in Australia

Floods and Flood Insurance-In the wake of the recent devastating Floods in Queensland Australia it is timely to consider flood & property insurance. Some people were uninsured because the cost of Flood Insurance were so high. premiums. Some were covered but not technically according to their policy. Many thousands of Queenslander's have been caught short with their insurance policies. Many have houses that are not condemned as inhabitable. Many have lost all their possessions; Or have been so damaged by water and mud that they are now useless. If you are going to get house insurance firstly check your house on home & see if it is in a flood prone area. Secondly check with each Insurance company what their definitions of floods are including flash floods. Some Insurance companies such as Suncorp here in Queensland make a point of advertising the fact that they cover for flood insurance. So everyone knows in clear and simple terms that they are covered for flood insurance. The government is considering regulating insurance companies to adopt clearly defined definition so that people can in clear English understand when and when they are not covered fro flood insurance. The Term 'rising river' has become a term of contempt here in Queensland as some insurance companies attempt to define the 2011 Floods under this definition which would exclude many policy holders.

Across America it has been calculated that only 20% of homes at risk for floods are covered by flood insurance. Private insurers are unable to insure against the peril of flood due to the prevalence of adverse selection, which is the purchase of insurance by persons most affected by the specific peril of flood. In traditional insurance, insurers use the economic law of large numbers to charge a relatively small fee to large numbers of people in order to pay the claims of the small numbers of claimants who have suffered a loss. Unfortunately, in flood insurance, the numbers of claimants is larger than the available number of persons interested in protecting their property from the peril, which means that insurers are unable to cover their costs in flood insurance.

The lack of flood insurance can be detrimental to homeowners who may discover only after the damage has been done that their standard insurance policies do not cover flooding.

Flooding is defined by the National Flood Insurance Program as a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or two or more properties (at least one of which is your property) from: Overflow of inland waters, unusual and rapid accumulation or runoff of surface waters from any source, and mudflows.

Here in Australia after the recent floods debate has mounted over the definitions that some insurers are using to absolve themselves from liability from flood claims.  The term 'river rising' for instance has been used to absolve responsibility &payment by some insurers

Before spending your hard earned dollars on any insurance policy whether it be health, flood insurance, home and content insurance it pays to know in complete detail what you are and are not covered for in the event of a claim.