What is flood insurance and how much is it?

In a land of drought and flooding rains, flood insurance can be a necessity for many homeowners, but you need to be sure what you're covered for.

What is flood insurance?

Flood insurance is a type of home and contents insurance designed to cover your home in the event of a flood. 

What is a flood (according to insurers)?

It may sound straightforward but there is a standard insurance definition of flood, introduced in 2012 after public confusion of what constituted a flood in the eyes of insurers. It is:

"The covering a normally dry land by water that has escaped or been released from the normal confines of:

• any lake, river, creek, or other natural watercourse, whether or not altered or modified; or
• any reservoir, canal, or dam"

This applies to home and contents, domestic strata-title, and small business insurance policies.

Domestic flood insurance can be offered in four ways:

1. Standard inclusion
2. Standard inclusion, opt out at customer request
3. Not standard inclusion, opt in at customer request
4. Not standard inclusion

Most domestic insurance products are purchased direct from insurers while for commercial products, flood cover is not standard and must be opted into. Many commercial products are purchased via insurance brokers.

What's the confusion with flood insurance?

Even if your policy excludes flood damage, some policies may still cover you for events such as storm or rainwater damage.

This may cover the situation where your home gets inundated by rainwater that's fallen naturally from the sky.

But many insurers regard rainwater runoff as part of storm cover, so some insurers won't cover rainwater runoff when a customer chooses not to take out flood cover.

Chris Hunter

Insurance broker

What the expert says

"Any decent policy should cover damage from weather events like a storm or flash flood.

"A simple way to remember it is this: if it comes from above it should be covered. It if comes from existing water, make sure you have flood cover."

What other events may not be covered by flood insurance?

Some things that may not be covered by some insurers:

• 'actions of the sea' (such as tsunamis or storm surges)
• 'underground water' (like sewage)
• 'hydrostatic pressure' which could include leaks from water pressure on pools or retaining walls.

For some insurers, such events may be covered under a separate kind of cover, while others won't cover them under any circumstances.

The moral of the story: read and understand the product disclosure statement for your particular policy. Contact your insurer and get them to explain it to you clearly if in any doubt.

What does flood insurance cover?

Generally speaking, a good flood insurance policy should provide cover for:

• Temporary accommodation if you are displaced from your home due to a flood

• Any costs to repair your property if it is damaged structurally (some policies have a limit on this)

• Interior damage to your property

Flood insurance usually doesn't cover damage to things outside your property (like driveways or gardens, exterior fences etc.) or any damage that occurs within a few days of you taking out the policy.

See also: What is landlord insurance and why do you need it?

How to tell if you need flood insurance

If you live near a body of water or are in a high-risk zone, chances are you'll need flood cover.

The catch is, being in an area that requires flood cover means you'll likely pay a higher premium for it - or be charged a higher flood excess if you have to make a future claim.

You may even find that in some extreme zones, no insurer is willing to insure you at all.

How do insurers determine the flood risk of my property?

The general insurance industry has developed and licensed a National Flood Information Database (NFID) used by insurers to determine the flood risk of individual properties.

The database has been created in conjunction with state and territory governments and contains almost 14 million addresses overlayed with the known flood risk according to government flood mapping. But alas, it is not a public database.

Most insurers use this to calculate their premiums based on risk and other criteria including building type, location, and claims history. This will vary according to individual insurers.

Flood stats

The vast majority of high-risk flood properties (around 80%) are in Queensland, New South Wales, and Victoria.

These states also account for 99% of properties in the highest flood risk category, considered a one-in-20 year flood risk.

According to the Insurance Council of Australia, 1.4 million properties are at risk of flooding and around half of these fall short of flood resilience measures required under modern planning and building standards.

How much does flood insurance cost?

There is no hard and fast dollar amount on this. It will ultimately depend on your insurer's assessment of your property's flood risk, the type of home you have, and how many times you've lodged insurance claims in the past.

In some cases, generally in lower-risk areas, flood cover will be a standard inclusion in your home and contents insurance at no extra cost. In high risk areas, it can be tens of thousands of dollars annually. In such cases, the insurer will deem it's not a matter of 'if' the property will flood, but 'when'.

In 2025, the Insurance Council of Australia said for homes in the highest flood-risk locations nationally, the quoted flood insurance component of their annual premiums ranged between $7,000 to more than $30,000. 

1. Savings.com.au's two cents

As with purchasing all insurance products, it's important you shop around.

If you live in a low-risk flood area, there's a good chance your home and contents insurance policy will have flood insurance as a standard inclusion. If not, you can choose to add this on at what should be a relatively low cost.

But when you're looking at paying thousands of dollars just for flood cover, you need to do your research. Compare insurers and policies and don't just stay with your current insurer unless it is the most competitive and covers what you need.

Insurers are required by law to provide a Key Facts Sheet for their policies and the government dictates their information and layout to make it easier for consumers to compare products.

Also consider whether it may be better to pay a higher excess in the event of a claim and a lower premium. 

See the federal government's moneysmart website for advice on choosing home insurance.   

How do you know if you need flood insurance?

This all comes to down to your property's location, its proximity to water, and your own risk tolerance. Here are some tips:

• Use flood risk maps: These are publicly available through local, state, and federal governments. Some allow you to simply enter your address and the data will provide a scaled assessment of your flood risk.
  
  
• Consider historical data: Research past flood events. Long-term residents can provide valuable local knowledge but even if the areas hasn't flooded in living memory, consider that climate change and shifting weather patterns may increase the frequency and severity of weather events.
  
  
• Talk to your insurer: When you're taking out home and contents insurance, speak with potential insurers to understand their risk assessment for your address. It's also the time to get them to explain what their flood cover includes and doesn't include. Make sure you ask them to spell it out.
  
  
• Check with your lender: If you have a home loan, some lenders may require you to take out flood insurance, especially if the property is in a high-risk area.
  
  
• Take preventative measures: This could mean ensuring your drainage is adequate, making modifications to your property, or even elevating your home in a bid to protect living areas or critical infrastructure.
   
• Evaluate your risk tolerance: Even in lower-risk areas, there may still be a possibility of flooding. Consider what risk you're comfortable with, balance it with the cost of cover, and assess where you land.