Understanding home insurance for natural disasters

Natural disasters like bushfires, floods, cyclones, and hailstorms are a fact of life in Australia, with risks only intensifying as our climate changes. The tricky part? No two home insurance policies define or cover these events quite the same way, and the differences can be more unexpected than you’d think.

This guide isn’t about explaining every fine detail behind every last policy. After all, it’s only your policy that matters.

So join us as we highlight how coverage can vary, explore nuances you might not have considered, and give you the tools you need to confidently assess your policy and make sure your home is properly protected.

Storms can occur anywhere, at any time, theoretically putting all homeowners at risk. Falling branches, lightning strikes, hail—these everyday weather events can cause significant damage and aren’t limited to specific regions.

And that’s not to mention cyclones, which as described in a 2024 report, the Insurance Council of Australia (ICA) projects will become Australia’s most costly catastrophic event by 2050, causing $4.4 billion in annual damage. 

This figure doesn’t even include the flooding cyclones often trigger—an event both the ICA and insurance companies often categorise separately.

Just look at a few examples of how policies can handle storms and related events in very different ways:

• Cyclones are usually covered under the storms section of your policy, but floods usually aren’t. We’ll get into floods later.
• Storm surges, which are sudden rises in sea level caused by storms, are often not covered at all or, if they are, must occur alongside other insured storm damage.
• While storm surges might be covered, other sections of the sea like tidal waves may not be.

As you can see, storm coverage isn’t always straightforward. That’s why it’s worth taking the time to familiarise yourself with your policy. 

We’ll give you tips on how to do that after covering a few more weather concerns. 

So next, let’s look at floods.

Insurance companies usually have strict definitions for flooding, often along the lines of ‘water escaping from bodies of water such as rivers, creeks, dams or lakes.’

By 2050, the ICA projects flooding to cause $2.3 billion in damage annually, putting it on track to become the second most costly catastrophic event after cyclones.

Currently, the ICA says flooding is Australia’s costliest extreme weather event.

The ICA report doesn’t clarify whether the current ranking includes smaller-scale floods alongside catastrophic ones. Either way, we’re all well aware of how much damage floods can cause - especially if you're in Far North Queensland.

So what makes flood coverage so nuanced? Let’s have a look:

• Flood cover is sometimes included automatically, but many policies make it optional—either as an opt-in or opt-out feature.
• Some policies classify rainwater runoff or pooling in low-lying areas as flooding, while others consider it storm damage.
• The ‘sea’ usually isn’t one of the bodies of water your policy includes in its definition of a flood.

Again, this makes it abundantly clear that you need to become intimately familiar with your home’s risk profile and your policy. 

But before we get to how, let's look at bushfires.

Bushfires have shaped the Australian landscape for millennia, playing a vital role in the ecosystem. But in recent years, they’ve become more frequent and intense, with devastating impacts on homes and communities.

Few of us will forget the catastrophic Black Friday fires or the 2019–2020 bushfire season, the worst ever recorded in New South Wales.

In fact, by 2025, the Insurance Council of Australia (ICA) estimates bushfires will be the third most costly natural disaster in Australia, causing $2 billion in annual damage.

As you’ll see, this topic may not seem as nuanced as storms or floods, but it’s still not always straightforward. For example:

• Unlike storms and floods, many policies cover bushfires and house fires in the same section, treating them similarly.
• However, some policies include extra benefits for bushfires that don’t apply to house fires, such as money toward efforts to limit the fire’s spread.

So even when treated similarly, insurance companies manage to change up how they handle different types of fires. Yet again, another reason to go through your policy with a fine-tooth comb, especially if you live in a region prone to bushfires.

This isn’t an exhaustive list, but it highlights some less common disasters and the nuances of how insurers may handle them. Let’s take a look:

• Landslides. These are typically excluded unless they result directly from another insured event, like a flood or storm, and occur within a specific timeframe of said event.
• Acts of the sea. This refers to events like tidal waves or tsunamis. These are often excluded unless caused by an earthquake, which may be covered. The distinction between natural tidal action and disaster-driven waves is a common source of confusion.
• Earthquakes and tsunamis. These are often included in standard policies, but you may not be covered for damage that occurs after a certain amount of time has passed since the event (ie. 72 hours).
• Storm surges. These are caused by extreme weather events, such as cyclones, and lead to rising sea levels and flooding. Some insurers treat storm surges as part of storm damage, while others classify them separately, often with different limitations or exclusions.

With so many variations in how insurers handle natural disasters, the best way to stay protected is to dig into the details of your own coverage. So we’ve put together the following tips to help you assess your risks, understand your policy and ask the right questions—so you can feel confident you’re ready for whatever nature throws your way.

1. Check your home’s risk profile

Understanding the risks specific to your location can help you choose the right insurance coverage. These tools can help:

• The Climate Council’s Risk Map of Australia. This interactive map offers detailed insights into climate-related risks across Australia, allowing you to zero in on your specific suburb or locality. It reveals the proportion of properties in your area at medium to high risk of natural disasters and allows you to filter by hazards such as bushfires, flooding or extreme winds.
• The Australian Disaster Resilience Knowledge Hub. This resource offers a wealth of information on past disasters, risk management and preparedness. Its interactive map provides insights into disaster histories, such as cyclones, bushfires and floods all across Australia. 

2. Study your PDS

The product disclosure statement (PDS) is your policy’s single source of truth. It provides all the details about what’s covered, what isn’t, and the conditions or limitations of your coverage. Here’s how to get the most out of it:

• Start with the section on ‘what’s covered’. This is where you’ll find a list of all the natural disasters included in your policy, how they’re categorised (e.g., storms, acts of the sea), and specific exclusions for each category.
• Cross-check with your risk assessment. If you’ve identified particular risks for your property, like bushfire or flooding, focus on the sections of the PDS that detail that specific cover.
• Review exclusions thoroughly. Look at both event-specific exclusions and the general exclusions section. For example, you’ll usually find natural occurrences like ‘tree root damage’ excluded altogether.
• Pay attention to thresholds and limits. Policies often include conditions like minimum damage thresholds or caps on claimable amounts for specific disasters.
• Check for waiting periods. Some policies have waiting periods for predictable disasters like cyclones or bushfires, meaning you’re not covered if the event happens within a certain time period of taking out your policy (eg, 72 hours). However, some exceptions may apply.

3. Call your insurer

When speaking with your insurer, it’s important to be prepared so you can get clear, actionable answers. Here are some tips to help you get the most out of the conversation:

• Know what you want to ask. Write down specific questions beforehand so you’re prepared, like whether rainwater runoff is covered under the flood section or somewhere else (if that’s one of your concerns).
• Speak to the right person. Ask for someone who knows the product disclosure statement (PDS) front-to-back and can provide clear, accurate answers.
• Get it in writing. Ask where to find any explanations in the PDS. If they can’t point to it, be cautious—only the written policy matters.
• Keep a record. Write down the name of the person you spoke to, the date, and any key details for future reference.
• Be prepared to switch. If they can’t answer your questions or your policy doesn’t meet your needs, it might be time to look elsewhere.

In other words, approach the conversation with preparation and persistence and don’t give up until you have the clarification you need. 

Insurance is about more than ticking boxes—it’s about knowing exactly where you stand when disaster strikes. The fine print might not be exciting, but it’s the only way to be sure your policy protects what matters most.