Stormwater or floodwater? Only your insurance policy knows, it seems!

Jhai Mitchell

I know its spring but as investors we need to speculate in to the future and look at worst case scenario. In the past  torrential storms and flash floods have had many investors in toongabbie and seven hills scratching their heads, trying to work out just what it is their insurance policy does cover in the situation.


Most insurance policies cover damage from stormwater (though to different degrees) but do not cover damage from floodwater. Yet many homeowners would consider a sudden rush of water which floods their house to be stormwater as it is a result of the storm!

Fido, the consumer website of the Australian Securities and Investments Commission (ASIC), offers the following definition. Fido advises that you should check the details of your own insurance policy, but as a general guide:

1. "Stormwater" is defined as water running over the surface of the land while "floodwater" is defined as water escaping from a water course.
2. In practice, it usually requires expert evidence from hydrologists to help determine whether the damage was caused by "stormwater" or "floodwater".
3. If the damage was caused by a combination of "stormwater" and "floodwater", this damage will not be covered (even if your policy doesn't spell out what happens in this situation).

The Insurance Council of Australia advises that the first step in determining whether your home could be at risk is to obtain a flood map from your local Council or floodplain management authority.

Some flood maps focus primarily on rivers and creeks; however many also cover historical localised flooding due to overtaxed drains, etc (flash flooding). Consumers should be aware that many factors can influence the accuracy of flood mapping including building development, road works, new agricultural growth, changes to river and creek catchments as well as changes to drainage and sewer arrangements for your area.

Frequent re-familiarisation of the risks through engagement with your local council and/or floodplain management authority is essential.

The Insurance Council warns that in some areas flood maps are either not available or less than thorough.  This has led to a push for the development of a consistent national flood mapping model, as the main problem most insurers have in providing residential flood cover is their ability to map, understand and price the risk.

Australian Securities and Investments Commission (ASIC) has offered some tips about getting the right insurance cover and making claims to meet the cost of repairs to homes and possessions.