Does home and contents cover flooding?
In the aftermath of the tragic Queensland floods of 2011, many homeowners found out the hard way that the source of the water (and fine print in the insurance policy) could make a huge difference when it came to making a claim on their home and contents policy.
The consumer backlash was so fierce, it prompted the industry to update its Insurance Code of Practice and iron out a few of the creases that were causing confusion.
Insurers now have a clear definition of the term “flood”, defining it as, “the covering of normally dry land by water that has escaped or been released from the normal confines of any lake, river, creek or other natural watercourse, whether or not altered or modified, or any reservoir, canal, or dam”.
Many home and contents policies automatically cover storm run-off, but may require you to opt in and pay extra for flood cover. However, the latter is increasingly becoming a mandatory component.
The good news according to consumer advocacy group CHOICE is the Financial Ombudsman Service (FOS) has been increasingly ruling in favour of consumers caught out by complicated wordings.
There has been a number of reported incidents where the FOS ruled in favour of consumers who had originally had their claims rejected due to technicalities such as not having flood cover.
CHOICE reports other changes to the Code of Practice brought about by the 2011 floods include:
- A four-month deadline for accepting or rejecting a claim unless there are extenuating circumstances, including "extraordinary catastrophe or disaster as declared by the Insurance Council Board".
- A 12-week deadline for reports by external experts, such as hydrology reports; the sharing of these reports with policyholders; and an explanation of how they affect claims decisions, if requested.
- Enhanced employee training so that company staff can "carry out their claims-handling tasks and functions competently, and deal with customers professionally", with a focus on understanding a policyholder's particular circumstances.
- A new "right to claim", says insurers, "will not discourage you from lodging a claim, even if we are of the view that it is unlikely to be accepted".
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