Bushfires, coastal erosion and storms – this is the current triple-threat impacting Australian homes, according to Domain’s 2024 Perils Report.
With billions of dollars’ worth of Australian properties facing a high risk of disaster, what can landlords and agents do to get on the front foot?
Billions of dollars worth of Australian properties face a high risk of bushfire or floods.
In fact, according to the data, almost half of all properties are at risk of bushfire, and 8.1 per cent of
Australia’s 11.7 million residential properties are at risk of flood.
Meanwhile, an estimated one-in-10 homes, within 150m of the coast, are at risk of coastal erosion.
And, it is predicted that natural disasters will escalate, putting more pressure on property values, homeowners and entire communities.
So, what can be done to tackle this growing issue?
First, potential property owners need to be better informed of the risk rating of the property they are purchasing.
Local and state governments hold information about the risk of different properties, and buyers should access this information so they can make an informed decision before purchasing real estate.
In addition, building design is evolving to help mitigate the risk of damage from changing weather conditions and there are discussions around halting construction and residential development in flood-prone zones.
Insurance also has a role to play.
The right insurance means owners can financially protect their investment against a range of extreme weather events.
When it comes to landlord insurance, a good policy should provide cover against key environmental events – bushfire, cyclones, severe wind, floods, storms and hailstorms.
But, not all policies cover all environmental risks
Some risks may be outright excluded from policies, such as loss or damage caused by an act of the sea.
Other features may be optional extras and come with a higher premium.
For example, flood cover is not standard in all landlord insurance policies.
Some insurers will not cover the risk at all, especially for owners of properties in flood-prone areas and others allow owners to ‘opt out’ or ‘opt in’.
In light of Domain’s report, we are going to look at bushfire, flood and coastal erosion and discuss how insurance steps in.
Bushfire
Most landlord insurance policies will cover bushfire.
But in terms of the specific circumstances under which the rental could be covered, that really depends on the individual insurer.
Many insurers have varying definitions of ‘fire’, so it’s important to double-check the wording used.
At EBM RentCover, cover for bushfire is included in our policies, however sometimes we may have embargoes in place, which means people living in certain areas are not able to take out this kind of cover because a bushfire is imminent (learn more below).
Also, we (like a lot of other insurers) only recognise fire damage if there was a flame present.
In other words, landlords most likely won’t be covered for scorching or damage caused by smoke or
soot from a bushfire.
Insurance for bushfire losses typically cover the landlord’s property only, and does not include the personal possessions of tenants, so they may like to consider renters’ contents insurance.
Flood
Flood events are a seasonal reality and will continue to be experienced in the future, with the severity likely to increase – and the losses mounting.
Considering this, the insurance industry recently re-assessed the viability of continuing to offer flood cover for high-risk properties.
This means that a lot of insurers are not able to offer cover to those in high-risk flood zones.
Note: High-risk refers to properties in flood-prone zones, which is determined by an assessment of the level of flood risk based on flood maps and historical claims data.
Since 2015, EBM RentCover has automatically included flood cover for all clients.
And, we have done so at a competitive price.
Currently we continue to offer flood cover to most properties across Australia.
However, there is a small percentage of properties that we have deemed to be in areas that are at a greater risk of experiencing a flood.
These properties sit outside the criteria required to take out our policies.
Insurance is ultimately designed for the unpredictable, not for events that are likely to occur.
Coastal erosion
We want to be up front and honest.
Several environmental conditions are uninsurable, as the damage or loss is not the result of a single ‘defined’ event.
An example of something not covered is coastal erosion because this is gradual, and insurance typically doesn’t cover events that happen over time.
Further limits and exclusions
Most insurers require a policy to have been active for a certain amount of days before it will respond to a claim relating to weather events.
For example, at EBM RentCover, a policy must be active for longer than 72 hours before it responds to a bushfire claim.
In addition, embargoes may prevent someone from taking out cover.
An embargo is basically a restriction an insurer applies when they will not accept new policies in certain areas or circumstances.
It stops people from purchasing insurance when an event is known to be extremely likely or already having an impact.
If a risk is imminent, the likelihood of that risk occurring and therefore a claim being lodged, is consequentially higher.
As Australia’s environmental conditions change, landlords need to create a ‘buffer’ against loss and damage caused by certain perils.
One very important buffer is having the right insurance policy in place – one that provides financial protection against events like bushfire and flood.
Every investor wants a secure investment.
But not everything always goes to plan and some events simply can’t be controlled.
What can be controlled is whether your landlord clients are protected by the right landlord insurance.
Partner with EBM RentCover today.
