Fire Insurance: Is It Worth Having For Your Home?

Australia’s hot, dry climate makes bushfires a real concern in all Australian states and territories. Victoria is one of the most fire-prone areas in the world¹, but extreme fire weather can occur anywhere in Australia².

If your home is in a potential fire zone, finding suitable insurance can help give you peace of mind if a fire-related accident occurs.

Risks of buying in a bushfire prone area

The Australian bush is known for its bushfires, but fire-prone areas come in many shapes and sizes, including¹:

• Coastal scrub
• Rural grasslands and paddocks
• Dense or open bush
• Grassland and town borders
• Bushland and town borders

Even when there’s no dense bush near your home, you could still be in a potential fire zone. Each state and territory maps fire-prone areas³, so you can check an area before deciding to buy.

If you do buy in a fire-zone, your home and its contents could be at risk of damage from bushfire. While you can’t avoid this completely⁴, you can take steps to reduce the risk⁵. Some of these steps include:

• Building or renovating to state or territory bushfire building standards⁶
• Designing and maintaining a fire-wise garden
• Preparing your home against fire
• Purchasing home and contents insurance

Buying fire insurance won’t prevent damage to your home, but it will help you reduce the significant financial impact of a bushfire.

Bushfire insurance Australia

In Australia, cover against bushfires is usually included in home and/or contents insurance⁷. You can buy these separately, but it’s common to bundle them together into a home and contents insurance package.

This type of insurance doesn’t just cover you for bushfires – it may also cover you for other natural disasters, like floods and storms⁷.

Not all home and contents insurances are created equal⁷, so it’s vital to check exactly what you’re covered for before an insurance event occurs. To give you an idea:

• Most insurers will cover bushfires but not all will cover floods or storms
• Exclusions and caps vary between insurers
• Some insurers may have special conditions

Types of Home Insurance

The two types of home insurance are:

1. Total replacement cover
2. Sum-insured cover

Sum-insured cover is the most common and covers you for a pre-selected amount to rebuild your home. Total replacement cover is less common and covers you for the total cost of rebuilding your home to its original standard.

It’s important to estimate rebuilding costs as accurately as possible to make sure your insurance provides suitable cover for you.

Total Replacement Cover Vs. Sum-insured Cover

There are advantages and disadvantages to both total replacement cover and sum-insured cover⁷.

Total Replacement Cover	Sum-insured Cover
Reduces the chance that you’re underinsured in the case of a bushfire	Could leave you underinsured in the case of a bushfire
May still leave you out of pocket if building standards have changed in your area	Should be checked regularly to make sure your insured amount is relevant to today’s prices
Funds to rebuild may take longer to receive because your insurer must do a full assessment first	Funds are usually received quicker because the amount has already been agreed
If your home has restricted access after a bushfire, it could delay the funds even more	Some insurers offer a policy extension that gives you up to 30% more in the case of total loss

Bushfire Insurance Cost

Large-scale, devastating bushfires cost $77 million a year in Australia⁸, according to the Australian Institute of Criminology. This does not include small bushfires, which can still be financially devastating to locals in the community.

For individual property owners, the costs of rebuilding can be significant, so it pays to have the suitable in place. If you’re thinking about bushfire insurance, here are some things to check before deciding on your insurer⁹:

• Does the policy cover you specifically for bushfires?
• Does it cover all bushfire-related damage, including where there was no flame?
• What other types of natural disasters are covered?
• In the event of a claim, what does the insurer need before cleanup begins?
• Does the policy cover cleanup? What does this cover specifically include?
• Does the insurer offer total replacement cover?
• What is the price difference between total replacement cover and sum-insured cover?
• Does the insurer offer a sum-insured policy extension?
• Does your policy include emergency accommodation or other extras like demolition and debris removal?
• If so, is this in addition to the sum-insured amount?

Answering these questions ahead of time may help you to find the cheapest premium for the insurance that best suits your individual needs.

Making a claim after a bushfire

You should tell your insurer as soon as possible if your home is damaged in a bushfire. Giving them as much detail as possible and answering all questions as accurately as you can will help them process your claim quicker.

Even if you can’t access your home to assess the damage, you can still contact your insurer to get the claims process started.

Every insurer is different when it comes to processing and assessing your claim. However, there are some things to think about in the event of a claim¹⁰:

• Insurers usually want to assess the damage to your property during an onsite visit before any repairs are done
• They may also want to approve your repairer or builder
• You can start emergency repairs before your claim is processed but keep clear records of all damage and repairs (including photos, videos, receipts for work). It’s also important to read what you can or can’t repair before you speak to your insurer, as this may compromise your claim.
• Wherever possible, let your insurer know what you plan to do before you do it

Finding a suitable policy for your needs

Home insurance covers various events and cover will depend on the specific wording in your policy. If your home is within a fire zone and you’re particularly concerned about bushfires, it’s vital to read policies carefully to see exactly what they cover.

Click here to view iSelect’s range of home & contents providers, and select the one which suits you.

iSelect does not provide a comparison service for home and contents insurance. We provide a click through arrangement instead. We receive a commission for each product sold through our partner’s website or contact centre.

iSelect General Pty Limited ABN 90 131 798 126, AFS Licence Number: 334115. Any advice provided by iSelect on the website is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice iSelect gives you, having regard to your personal situation, before acting on iSelect’s advice or purchasing any product through our partner’s website. You should consider iSelect’s Financial Services Guide which provides information about our services and your rights as a client of iSelect.

Sources:
1. https://www.cfa.vic.gov.au/plan-prepare/am-i-at-risk
2. http://www.ga.gov.au/scientific-topics/hazards/bushfire
3. https://www.rfs.nsw.gov.au/plan-and-prepare/building-in-a-bush-fire-area/planning-for-bush-fire-protection/bush-fire-prone-land/check-bfpl
4. http://www.ga.gov.au/scientific-topics/hazards/bushfire
5. https://www.cfa.vic.gov.au/documents/20143/71585/Your-Guide-to-Property-Preparation_WEB.pdf/a0cfdac9-99ca-48e6-d36f-b3a5ef9c6a9c
6. http://www.vba.vic.gov.au/__data/assets/pdf_file/0020/40583/A-guide-to-building-in-Victoria-after-bushfires.pdf
7. https://www.moneysmart.gov.au/insurance/home-insurance
8. https://aic.gov.au/publications/bfab/bfab002
9. https://securent.nt.gov.au/prepare-for-an-emergency/insurance
10. https://www.legalaid.nsw.gov.au/publications/factsheets-and-resources/bushfires-know-your-rights