How insurers classify storm vs flood damage

How insurers classify storm vs flood damage

If your commercial premises are flooded during a storm and you have flood insurance, you would most probably make a claim and expect a payout. Unfortunately, if you don’t have flood cover there may be an issue when making a claim. Knowing the difference between what’s storm water damage and what’s flood damage under an insurance policy can make a huge difference. Storm rainwater damage is usually covered under insurance policies, while flood is not always covered and may only be available as an option at an extra premium.

So as a business owner, it’s important that you understand the differences between flood damage and storm water damage. That’s because if your business is impacted by water during a storm, the claims adjuster will have to determine if it is storm or flood damage.

What is a flood?

In 2012 the Federal Government decided that a standard definition of flood for all Consumer focussed policies would help to reduce uncertainty and claim disputes. The definition is water escaping or being released from a lake, river, creek, canal, reservoir or dam. So if a creek overflows and water floods the land and your commercial building and you have flood insurance, you can make a claim for the loss and damage. On the other hand, if you only have storm insurance, your flood damage claim would be refused.

What is a storm?

Most insurance policies will cover you for damage as a result of “storm,” “rainwater” and “water run-off.” The exact definition of each of these words will depend on the policy you have, but generally they are:

Storm: a storm, cyclone or severe weather often accompanied by strong winds, rain, lightening, hail, snow or dust.

Rainwater: rain that runs off or over the surface of usually dry ground (and can include overflowing water from stormwater drains or gutters).

Run-off water: rainwater that has collected or flowed across from normally dry ground or overflowed from pools or spas.

Understanding the distinctions between the two can help you recognise if your business needs flood insurance or if storm water cover is sufficient. Without the correct insurance, your business can be devastated not only from the water damage it’s incurred, but also the loss of business as you won’t be able to trade.

Does my policy include flood and storm damage?

You will be happy to know that the majority of property insurances also include storm water damage. Not all of them do however, which means you need to check the inclusions and exclusions of your policy. Some insurers will include flood damage as standard in their policies, whilst others offer it as an option, and yet others exclude flood damage.

If you are unsure of your coverage, a quick call to your insurance adviser will either set your mind at rest or help you take out the correct type of insurance for your needs. You should also check to see if your buildings are in a flood prone area. If they are, you will need flood insurance, not just storm insurance. Some insurance companies are offering flood cover at high premiums, so it also pays to shop around.

Another point to check on your policy is whether cover is included (or excluded) for damage caused by strong winds, snow and cyclones, as well as burst pipes, broken gutters and water mains.

What happens when I make a claim for storm or flood damage?

Once your claim has been received by your insurance provider, they will likely send out an adjuster to determine the cause of the damage and advise on whether it is covered by the policy. The adjuster will also make an estimate of the amount of damage and cost of repairs. However, if the adjuster cannot identify if the damage was caused by either flood or storm, they may ask an expert hydrologist who will be able to identify the source of the water.

To get information on whether your policy covers storm water or flood damage, talk to an insurance specialist today and find your local adviser.

General Advice Warning

The information provided is to be regarded as general advice. You should obtain and consider the relevant product disclosure statement before making any decision to purchase this financial product.


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