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Could Climate Change Impact The Way Homes Are Insured?

From catastrophic fires to devastating floods and severe storms, Australia has witnessed first hand the rise in extreme weather events due to climate change. With damaging weather events and natural disasters becoming more frequent and intense, it could be time to revisit your home insurance policy to make sure you’re covered.

How climate change can affect home insurance

You might be wondering, ‘what does climate change have to do with home insurance?’ Climate change has a direct impact on home insurance premiums. It's one of the main reasons premiums have been increasing.

In 2019, the Insurance Council of Australia (ICA) released a statement acknowledging the link between climate change and the increase in frequency and severity of extreme weather events. These events often result in damage to infrastructure, buildings and people’s homes, which leads to more insurance claims. This ultimately results in higher risk involved in insuring people’s homes against weather events and higher premiums to account for this increased risk and the chance of insurance payouts.

For people already living in high-risk regions, like flood prone areas, premiums are likely higher than less risky areas to account for the possibility of an extreme weather event. In this case, people living in risky areas need to weigh up the cost of insurance against the potential financial impact an extreme weather event could have on their livelihood.

As the climate continues to change, insurance risk is evolving with it, which is why it’s a good idea to regularly re-evaluate your home insurance. Check your policy annually to make sure you’ve got the right cover in case you’re ever hit by extreme weather and need to make a claim.

Types of home insurance

When it comes to protecting your home against natural disasters and extreme weather events, there are a few different home insurance options to choose from. From standalone building and contents insurance to a combination of the two and landlord insurance for rental properties, there’s bound to be a policy that meets your needs. Policies often differ across insurance providers, and can also be affected by the risk level of your postcode too, so be sure to check the PDS to make sure you get the right cover.

Building insurance

Building insurance protects the structure of your home against insurable events. Some insurance providers cover most weather events and natural disasters, while others have more limited coverage or exclusions depending on where you live. Have a read of your PDS to check that your policy meets your needs.

Events like fire, flood, storm, impact, theft and earthquake come standard with Youi’s building insurance. Insurers may offer combined building and contents insurance so you can have your home covered with one handy policy.

Similar exclusions apply to Youi’s contents cover, so if you’ve got any business items, jewellery or high value things then be sure to double check whether you need to allow for them separately.

Landlord insurance

With Youi, landlord insurance takes our building and contents policies and adds a few useful extras and options to suit landlords’ needs. For example, if your building is subject to an insurable event and is no longer safe for tenants to live in, Youi will cover the loss of rent for up to 12 months.*

Insurance protection against extreme weather events and natural disasters can differ depending on the insurer you choose and the pricing of policies can be affected by your address if your insurer has deemed it as high risk. Make sure you do your homework to find a policy that suits you and check it regularly to keep yourself covered.

How to protect your home from climate change

The first step to protecting your home from climate change is to get insured. Make sure your home insurance policy meets your needs and offers the right protection based on where you live.

Although paying a higher premium for insurance coverage in high risk regions isn’t everyone’s idea of fun, insurance is there to help you financially recover from losses like extreme weather events and natural disasters.

If you live in a high risk area it could be worth investing in mitigation features to protect your home and lessen the impact of an extreme weather event in the future. From fireproofing, floodproofing and anything in between, there’s plenty you can do to protect your home against potential weather events. Investing in mitigation elements might cost you in the short term but it could save you from heartache and being out of pocket down the line.

Besides exploring the mitigation options, it can be worth getting out into your community to see what’s being done locally. Check out what action the local Government and Council are taking to plan for more frequent natural disasters in the future and how they plan to tackle climate change.

There’s no doubt that climate change is impacting home insurance and increasing premiums. As damaging weather events increase in severity and frequency, it’s worth revisiting your home insurance to make sure you’re covered. Check out Youi’s home insurance and select the options that suit your needs.

*Information provided in this article is general advice only and has been prepared without taking into account any person’s objectives, financial situation or needs. Terms, conditions, limits and exclusions apply. Product issued by Youi Pty Ltd. Consider our Home Product Disclosure Statement and Target Market Determination to decide if this product is appropriate for you before you make a decision to purchase or continue to hold a product.

Recommended reading
Insurance Council of Australia. (2019). INSURANCE COUNCIL OF AUSTRALIA PUBLIC STATEMENT ON CLIMATE CHANGE.