Flood Insurance – should your business take out cover?

After the 2011 floods in Queensland, the government considered making flood cover compulsory in all insurance policies, including business insurance. Although the legislation was not passed, many insurance companies amended their policies to include flood cover as standard.

With the recent 2017 floods in Queensland and northern New South Wales caused as a result of Cyclone Debbie, many businesses (including shops and farms) experienced firsthand the need for flood insurance, while other businesses across the country witnessed it. Damage caused by Cyclone Debbie is estimated to exceed $1.5 billion. A major flood, such as the floods that devastated towns in Lismore and Tweed Heads, can cause lasting damage to your business and property. Most businesses in these areas thought their properties were safe, either placing too much trust in the local flood levees or thinking they were not in a flood zone.

So, should you invest in flood cover for your business or not?

Coverage defined

The ‘standard definition’ of flood cover most often includes cover for your business assets and contents should they suffer from damage due to the covering of normally dry land by water that has escaped or been released from the normal confines of:

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

Even if your policy excludes flood damage, your policy will still cover you for events such as storm damage or rainwater damage. Storm or rainwater cover in your insurance policy may cover the situation where your business becomes inundated by rainwater that has fallen from the sky as opposed to rainwater that has become flood water.

Actions of the sea, sea level rises and storm surges all describe inundation caused by movement of seawater. Coastal properties can often be very exposed to this type of risk or associated damage (such as erosion).

If you own a coastal property, it is important to understand exactly what damage is covered and not covered in your policy as most insurance policies do not cover actions by the sea.


The cost of taking out flood insurance depends on a range of factors, including your proximity to waterways, any roadworks that may be taking place, agricultural developments, current or upcoming changes to rivers and catchments, and the presence of flood levees. Factors such as these are taken into account by insurance companies in determining your premium. Insurance companies determine your level of risk and the level of risk it is willing to take on in order to provide you with appropriate cover.


Most local councils offer residents flood awareness maps for their area. The maps detail the layout of the area and your property’s general risk of flooding. These maps can help you determine if you are in a high-risk area and require flood cover or if, based on previous events, you are in an area that does not normally flood. Knowing this information can help you decide if flood cover is something you need and the level you may require based on your location. It can also let you know if you are eligible for cover as some insurance companies do not provide flood cover to those in flood-prone areas.

What does it cover?

Taking out flood insurance can ensure you have various types of property and equipment covered in the event of a flood, including but not limited to:

  • the business building;
  • business furniture;
  • business supplies;
  • business equipment including computers, laptops, phones, etc.;
  • business files, if salvageable;
  • fixed building items such as carpet and lighting;
  • personal effects of staff members; and
  • other electronic equipment such as a microwave or fridge.

So, should you consider investing in flood cover or not? The short answer: yes. You’ll thank yourself if anything ever happens. Plus, with the varied types of cover and options, you’ll find something to suit your company budget and needs whether your business is in a high-flood zone or not.

The information contained in this article, which is current as at the date of publication, provides only a general overview of subjects covered. It is not intended to be taken as legal advice or advice regarding any individual situation and should not be relied upon as such. Insureds should consult their insurance and legal advisors regarding specific coverage issues. All insurance coverage is subject to the terms, conditions, and exclusions of the applicable individual policies.
Jardine Lloyd Thompson Pty Ltd
ABN 69 009 098 864 AFS Licence 226827
One International Towers, 100 Barangaroo Avenue, Sydney NSW 2000
Tel: +61 2 9290 8000