Every Australian home and contents insurance policy comes with a Product Disclosure Statement (PDS) that can run to 80+ pages. Buried in those pages are the exclusions, sub-limits, and conditions that determine whether your claim will be paid. The most common complaints to the Australian Financial Complaints Authority (AFCA) relate to flood and storm exclusions, underinsurance (sum insured too low), and gradual damage exclusions. Reading the PDS before you buy — not after a loss — is essential.
What is a Product Disclosure Statement Exclusions?
A Product Disclosure Statement (PDS) is the legal document that sets out the terms, conditions, exclusions, and limits of an Australian insurance policy. Under the Corporations Act 2001 (Cth), insurers must provide a PDS before the policy is entered into. For home and contents insurance, the PDS covers what events are insured, what is excluded, how claims are assessed, and the insurer's obligations.
Red flags to watch for
Since the 2022 floods, many insurers have changed their definitions of 'flood' versus 'storm water runoff'. If flood cover is an optional extra, you may not be covered for the most common type of water damage in your area.
Underinsurance is the biggest risk in home insurance. If your sum insured has not been reviewed against current building costs (which have risen 20-30% since 2020 in many areas), you may only receive a proportionate payout.
Most policies exclude damage that occurs gradually over time — rising damp, slow leaks, rust. This means the leak you did not notice for six months may not be covered.
If you live near the coast, 'actions of the sea' exclusions can deny claims for storm surge, coastal erosion, and tidal flooding — events increasingly common with climate change.
Many policies cap individual items (jewellery, art, electronics) at $2,000-5,000 per item unless specified. If you have valuable items, they need to be listed and insured for their full value.
Some policies allow the insurer to cash-settle claims rather than rebuild. The cash settlement amount may be lower than the actual cost of rebuilding, especially if the insurer uses different cost estimates.
Your legal rights
The Insurance Contracts Act 1984 (Cth) governs insurance policies: s 13 imposes a duty of utmost good faith on both insurer and insured; s 14 prevents reliance on unfair terms; s 21-22 govern the duty of disclosure (modified by the Insurance Contracts Amendment Act 2021 to remove the duty for consumer insurance, replacing it with a duty to take reasonable care not to make a misrepresentation); s 54 limits the insurer's ability to refuse claims for breaches of policy conditions unrelated to the loss. AFCA handles complaints. The General Insurance Code of Practice (2020) sets industry standards for claims handling.
Questions to ask before you sign
- 1Is flood cover included, and how is 'flood' defined in the PDS?
- 2When was my sum insured last reviewed against current building costs?
- 3What is the gradual damage exclusion, and what types of water damage does it cover?
- 4Are there sub-limits on individual high-value items, and how do I add specified items?
- 5Can the insurer cash-settle instead of rebuilding, and how is the amount calculated?
- 6What is the excess for each type of claim?
- 7Does the policy cover temporary accommodation while repairs are underway?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.