The home insurance protection gap

Australia is no stranger to harsh weather, but with a changing climate making severe weather events possibly more frequent or worse,¹State of the Climate 2024. Bureau of Meteorology. 2024 it’s important to look at our homes and whether they have insurance policies in place to cover them.

Increasing weather risks and rising construction costs mean that even people with home and contents insurance could be ‘underinsured’, meaning their coverage might not be enough to payout a total loss of their home. This could leave people with significant expenses to make up the difference to repair their home or completely rebuild (or get a payout to buy a new house on the market).

It’s estimated between over half a million households are underinsured, and over 344,000 are not insured at all.²Betting the house. The huge number of Australians at risk of losing everything they own. The Australia Institute. 2025 Other estimates place these figures even higher. The home and contents insurance comparison service iSelect has compared Climate Council risk data on suburbs at risk of insurance unaffordability iSelect’s own sales data. By comparing home insurance sales data from policies purchased through iSelect’s platform, this revealed which suburbs with the biggest gaps in flood cover are most at potential risk of increased insurance costs driven by climate-change, extreme weather, and other risk factors.

Insurance for flooding often an extra, not a standard inclusion

Home and contents insurance can cover damage from a variety of causes, known as ‘insured events’. This can include vandalism, malicious damage, fire, theft, storm damage and more. When it comes to flooding, however, it gets a little more complex.

Some policies will include flood cover, while others might offer it as an optional extra. However, some policies might not include flood cover as an option at all, due to the elevated risk of flooding in some areas.

iSelect analysed home and contents insurance sales data for May 2025 to June 2026, covering 246 suburbs where homes were insured by customers purchasing an insurance policy through iSelect’s comparison service. The vast majority of insurance policies purchased for these suburbs had flood cover as an optional extra, and some policies included it as standard. However, there were 10 suburbs where some home and contents insurance didn’t include flood cover at all.

The suburbs with the biggest insurance gaps for flooding

In Bateau Bay in NSW, one in ten policies were insured without the option of flood cover at all. Flood cover was available as an optional extra for the other 90% of properties. According to the Climate Council, 39.17% of all properties were at risk of insurance unaffordability from climate-driven natural hazards. Cronulla was next at 9.1% of properties insured without any option for flood cover, and 3.74% were at climate-driven risk. The suburb with the third-biggest flood cover gap was Mulgrave in Victoria at 8.3% of properties without flood cover, but a low climate risk affecting only 1.06%. Of the 10 suburbs listed above, Surfers Paradise had the biggest risk for unaffordable insurance from natural hazards at 42.14% of properties, while 7.1% of home and contents insurance sales for this suburb had no flood cover available at all.

The suburbs most at risk from natural hazards

Of the 246 suburbs that iSelect had data for, these are the top 20 for natural hazard risk according to Climate Council data. Every property in Scarborough in New South Wales and Blackwood in Victoria was deemed at moderate or high risk, though these are small suburbs with only a couple hundred properties overall.

Green Point in New South Wales and Shepparton in Victoria have a much higher number of households, but very high risk rates at 94.52% and 92.86% respectively. The Queensland suburbs with the highest risk were Runaway Bay with 55.52% of properties at risk, followed by Mermaid Waters at 54.54%.

Of the top 20 suburbs, the vast majority had flood cover as an optional extra, and some had a few policies that included flood cover as standard. Only Bateau Bay in New South Wales and Surfers Paradise in Queensland had elevated risk from natural hazards and insurance gaps where not every policy included the option for flood cover.

There were suburbs in iSelect’s data that had a high rate of home and contents insurance, including flood cover. At the top of the scale was Bargara in Queensland, where 54.5% of home insurance sales through iSelect included flood cover. Notably, this suburb had a low natural hazard risk, with only 2.15% of residential properties affected. Kyneton in Victoria had 30.0% of sales with flood cover, and a hazard risk of 6.62% of properties, while Austral was New South Wales’ suburb with the highest rate of flood cover. Over a quarter of sales (26.8%) had flood cover, and the suburb had a risk of 8.44%.