Home insurance premiums in high-risk flood and bushfire areas across Australia have surged by up to 50% over the past two years, with further increases expected. The sharp rise is forcing thousands of homeowners to drop cover entirely or reduce their sum insured, leaving them financially exposed if disaster strikes. The affordability crisis is driven by escalating climate-related claims, rising reinsurance costs, and updated flood and fire risk mapping that has reclassified previously moderate-risk properties into high-risk zones.

Why Premiums Are Rising So Sharply

Insurance premiums are calculated on risk, and Australia’s accelerating exposure to natural disasters has fundamentally changed the pricing equation. According to the Insurance Council of Australia, insured losses from floods, cyclones, and bushfires have increased significantly in recent years, forcing insurers to raise premiums to remain financially viable (Insurance Council of Australia, 2026).

Three main factors are at work. First, the frequency and severity of flood and fire events have increased, leading to more claims. Second, reinsurance (the insurance that insurers themselves buy to spread catastrophic risk) has become far more expensive on the global market, and those costs are passed directly to policyholders. Third, improved hazard mapping now identifies properties that were previously considered low or moderate risk as genuinely high risk, triggering premium recalculations.

Properties in northern New South Wales, southeast Queensland, and parts of Victoria and Western Australia have seen the steepest increases, with some renewal premiums doubling or tripling within a single policy year.

The Abandonment Problem

High premiums are prompting two dangerous responses. Some homeowners are dropping home insurance altogether, gambling that they will not experience a loss. Others are deliberately underinsuring by reducing their sum insured or choosing building-only cover instead of combined building and contents, to lower the premium.

Both strategies leave households financially vulnerable. Without adequate cover, a total loss from flood or fire can mean losing the home and all possessions with no payout to rebuild or replace. Even partial losses become unaffordable out of pocket. ASIC’s MoneySmart service warns that underinsurance is one of the most common and costly mistakes Australian households make (MoneySmart, 2026).

The problem is particularly acute for mortgaged properties. Lenders typically require borrowers to maintain building insurance as a condition of the loan, so dropping cover can trigger a breach of the mortgage contract.

Read also: Why Home Insurance Premiums Are Surging in Australia

What Your Options Are

If your premium has jumped sharply, do not simply cancel your policy. Start by obtaining quotes from multiple insurers. Premiums for the same property can vary significantly between providers, and shopping around may deliver meaningful savings. Use comparison tools, but also contact insurers directly to ask about discounts for risk mitigation measures such as raising the home above flood level, installing ember guards, or clearing vegetation.

Consider adjusting your excess (the amount you pay out of pocket when you make a claim). A higher excess typically lowers your premium, though you must be confident you can afford to pay that excess if a claim arises. Review your sum insured annually to ensure it reflects the true cost to rebuild, not the market value of the property. Underinsuring to save on premiums is a false economy.

Read your Product Disclosure Statement (PDS) and the Target Market Determination (TMD) carefully to understand what is and is not covered, particularly for flood and storm damage. Definitions of flood vary between policies, and some exclude certain types of water damage entirely.

For personalised advice on your cover needs and options, consult a licensed insurance adviser who can assess your individual circumstances and recommend appropriate cover levels.

General Advice Warning

This article provides general information only and does not take into account your objectives, financial situation, or needs. Before acting on this information, consider whether it is appropriate for you, read the relevant Product Disclosure Statement (PDS), and consider obtaining personal advice from a licensed insurance adviser. Premium rates, cover terms, and availability vary by insurer, by property location, and by individual risk profile. Verify current terms and pricing with insurers and consult a licensed adviser for your personal situation.