It wont happen to me, but it just might! Owner Builders, Be Prepared!
The bushfire season is upon us and you need to be aware that insurers have a cooling off period generally between 7-14 days, where there is no cover! Contact us to organise your Owner Builder Construction & Public Liability Insurance policy.
The Steve Angel experience (scroll) is one to take notice of and make sure you are covered for bushfire and the repercussions of a loss where you are underinsured. His story is a ‘must read’.
If a bushfire destroys your home, having sufficient insurance can make the difference between successfully rebuilding and suffering irrevocable loss.
While it may seem mundane, expensive and something people hope never to use, being fully covered for what the insurance industry calls a “total loss” can be vital to recovery.
The pitfalls of underinsurance
Despite bushfires, floods and cyclones being an annual feature of life in Australia, many people are not financially protected, says Insurance Council of Australia spokesman Campbell Fuller.
“After every natural disaster in Australia we see that typically, about one in 20 properties are not insured at all,” Mr Fuller said.
“About two-thirds of renters don’t have any contents insurance and upwards of 70 per cent of properties are inadequately insured.”
It’s a situation that Steve Angel, who lives on a bushland property in Dwellingup, south of Perth, knows all too well.
In 2007 his home and all his things were lost to a devastating bushfire. He was away from home at time, fighting the fire as a volunteer and his teenage son was lucky to escape uninjured.
Afterwards, Mr Angel discovered his insurance payout would not cover the full cost of rebuilding his house and replacing his possessions.
“I was badly underinsured,” he said.
His insurance company had been increasing the insured value of his house by 3 per cent per year, but unbeknownst to Mr Angel, building costs in his rural area had increased by far more than that since the house was built 15 years earlier.
“The builder that built my house, when I asked him for a quote to rebuild the house that had burnt down, his price was $200,000 more [than the first time] and he wasn’t going to be able to start for three years.”
Insured value isn’t just the purchase price
Mr Fuller said there was widespread confusion between the insurance value of a house and the real estate value, and the replacement cost of a home can be far greater than the sale price.
“The insurer doesn’t really care how much you paid for the home, their concern is what would it cost to repair or rebuild, should that property be damaged or destroyed,” he said.
He said insurers consider the cost of building materials, the cost of labour, site clearance, waste disposal, architects’ fees and the cost and time of seeking council approval.
If properties are in bushfire zones, they might also look at whether the property would be subject to more stringent building standards on rebuilding.
Mr Angel rebuilt his house as an owner-builder, using the original plans and hiring all tradespeople directly — a decision he estimates saved him around $150,000.
His new home also has a sprinkler system that covers the roof, allowing the whole property to be wetted down.
He installed generators and an independent water supply and rigorously enforces a 20-metre buffer zone around the perimeter of the house.
Even surviving bushfire can be expensive
In 2016, when his property was once again threatened by fire, his house was left unscathed and he is now regarded as a success story when it comes to bushfire preparation.
But that fire still resulted in an $80,000 insurance claim, after losing 2km of fencing, 33 beehives, a carbon fibre kayak and damage to his water tank.
“My tank was full at the beginning but it was half full by the time the fire front came through, so the top half of the liner was destroyed,” he said.
“It does cost a lot of money to sort everything out, even if you are a success story.”
Don’t neglect bushfire preparations
Even neglecting basic maintenance can affect a claim.
“Insurers can deny part or all of a claim if a building has not been properly maintained or has suffered damage in the past and hasn’t been repaired,” Mr Fuller said.
“That is because as part of the policy you are expected to maintain that building and reduce the risks of something happening to that property.”
Mr Angel now checks his insurance and updates it every year, as well as thoroughly preparing his property every spring.
“Something people need to be very aware of is that if you haven’t done your fire breaks and you haven’t cleared the 20 metres around your house that is required by your council, [the insurer] can refuse your claim,” he explained.
“If you haven’t done the right thing, you can find yourself in a lot of trouble.