This fact sheet is one of a series that looks at the steps you can take to give yourself the best chance of fixing or replacing your property and belongings if they're damaged or destroyed in a natural disaster, such as a bushfire, flood or storm.
See Fact Sheet 18: Glossary for definitions of words and terms that are in bold text.
To find other fact sheets in the series go to www.InsuranceCheckup.tas.gov.au or visit your local Service Tasmania for an info pack.
About risk
Risk is all about the chance (risk) of something happening and the possible result (consequence) if it does happen.
We manage our risks every day. We're often not aware we're doing it, but every time we're faced with a choice, we think about risks and possible consequences. Generally, we get by just fine with this approach. But even though we're good at managing risks in many areas of our day-to-day lives, we don't always do so well when it comes to protecting our homes and belongings (which are usually some of our biggest assets) against disasters.
When it comes to natural disasters, we often think "it won't happen to me", that it's only people who live in the bush or on a river who can be affected by a natural disaster. But we know that storms can happen almost anywhere, bushfire embers can travel many kilometres ahead of a fire, and we don't need to be living right next to a river to experience flash flooding. By not planning for these possibilities, we're taking a big risk.
How risk relates to insurance
Insurance is one way of managing our risks. In insurance terms, risk is the chance of something happening (e.g. a natural disaster, theft, household accident) that leads to a person experiencing a financial loss.
Insurers calculate the financial value of different risks to help decide how much they would need to pay if a policyholder suffers a loss that is covered by their insurance policy.
Doing these calculations also helps the insurer work out what premium to charge for the policy.
Insuring against the risk of natural disasters
Depending on where you live, you may have an increased risk of loss of or damage to your home and/or belongings if a natural disaster comes your way. Repairing or replacing your things could be a huge financial burden for you.
Insurers already know your potential risk of certain events like natural disasters and theft based on where you live; it's how they calculate your premium. However, understanding your own level of risk can help you decide what kind of insurance cover will best suit you. It can also help you to prepare in other ways (e.g. by making changes to your home), which may make your property safer and help to reduce your premium.
Assessing your risk from potential disasters
There are a few ways you can find out your potential natural disaster risk:
- If you already have insurance, you can ask your insurer about your risk of natural disasters.
- Use a tool like the Tasmanian Government's RiskReady website (www.alert.tas.gov.au/riskready), which shows the potential risk to your address from bushfire, landslide, and coastal erosion and inundation.
- Some local councils may have information about natural disaster risks in your area. Check the Tasmanian Councils page on the Local Government Association of Tasmania's website at www.lgat.tas.gov.au or phone
03 6146 3740 to find out which council area you live in and its contact details.
Keep in mind that the cost of completely rebuilding your home may be more if you live in a natural disaster-prone area. Your council should be able to tell you if there are particular natural disaster building standards that might apply if you were to extend, renovate or rebuild.
Making an informed choice about insurance
Whether or not you choose to get insurance, there are steps you can take to minimise your risks from natural disasters (e.g. ensure gutters are kept clear, make sure you don't have vegetation or rubbish around your house that will catch fire and burn easily, and ensure that there are no trees overhanging your house). You also need to plan where you would stay (and how you would afford to stay somewhere else) if your home wasn't fit for living in.
It's true that a decision to not get insurance will mean that you won't have to pay a premium now and that might seem like your best choice. Keep in mind, though, that if you do experience a natural disaster, you may not get financial help if you have to repair or replace any of your belongings or your home, if you own one.
If you do decide to get insurance you will still be responsible for lessening your risk as much as you can, and you will have to pay a premium, but if the worst happens, your insurer will pay you a sum of money to put towards repair or replacement of items.
You do have to be careful that you understand the terms and conditions of your insurance policy – you will only receive a payout if what has happened matches exactly what is covered under your policy. That's why it's very important to carefully read the policy's Key Facts Sheet and Product Disclosure Statement and to ask your insurer to clarify with you exactly what is covered and not covered (see Fact Sheet 13: Finding and comparing insurers and insurance policies).
Resources
For general information, and for calculators and other tools to help you manage your own insurance:
- Understand Insurance: www.understandinsurance.com.au
- Find an Insurer: www.findaninsurer.com.au
- Money Smart: www.moneysmart.gov.au
Important notice
This fact sheet gives you basic and general information only. It does not cover every situation or everything you may need to know about insurance. It does not take into account your personal circumstances. Make sure you carefully read Key Facts Sheets and Product Disclosure Statements. Ask your insurer as many questions as you need in order to understand how your insurance policy will work for you. Use other tools available to you and seek professional advice if needed.
Information in these fact sheets has been drawn from a number of publicly available Government and non-Government resources.
This project has been jointly funded by the Commonwealth and Tasmanian Governments under the Disaster Recovery Funding Arrangements.