Preparing for and responding to disasters

On this page

• Introduction
• Limitations on insurance coverage
• Preparing for a disaster – insurance checklist
• Managing the increasing costs of insurance due to disasters
• Cancelling insurance if your organisation has closed due to a disaster
• Insurance cover for an organisation’s volunteers during a disaster
• Insurance implications for working remotely during a disaster

Introduction

Insurance is a contractual tool for managing financial risk. It will not stop a risk from occurring, but it may help to limit the financial impact of a risk.

It is important to understand the risks faced by your organisation and whether the risks can be managed adequately from a financial perspective. In making this risk assessment, you should consider potential disasters that your organisation is likely to face.

Taking out the right type and level of insurance for different kinds of risk is one way to manage the impact of these risks.

An organisation, depending on the service it provides, may be required to have specified insurance. For example, a courier provider may be required to have workers compensation and third party injury motor vehicle insurance.

Other common types of insurance which an organisation might take out include:

• volunteer personal accident insurance – protects volunteers from injuries while performing their duties
• directors’ and officers’ liability insurance – covers directors and officers against personal liability for wrongful acts or omissions
• public liability insurance – protects the organisation from liability for injuries or property damage caused by its activities
• professional indemnity insurance – protects professionals within the organisation from claims of negligence or malpractice
• property insurance – covers buildings, contents, and other assets against loss or damage
• machinery breakdown insurance – protects against the breakdown or failure of machinery
• business interruption insurance – covers lost income or expenses if operations are disrupted due to a covered event
• event-specific insurance – covers specific events, such as fundraising events or conferences
• cyber insurance – protects against financial losses and legal liabilities arising from data breaches or cyberattacks

For more information, see:

• our guide to insurance and risk management for community organisations, and
• part 4 of our national volunteering guide: volunteer safety

Not-for-profit organisations often face unique insurance challenges in the aftermath of a disaster. These challenges include:

• inadequate insurance – many organisations may not have sufficient coverage to cover the full extent of their losses
• policy exclusions – disaster-related events may fall outside of certain policy exclusions, limiting coverage
• delayed claims processing – there may be delays in insurance companies processing claims due to the overwhelming volume of claims after a disaster
• disputes about coverage – there may be disagreements between an organisation and an insurance company about the extent of coverage or the amount of compensation
• increased premiums – after a disaster, insurance premiums may rise due to increased risk
• limited availability of insurance – in some cases, insurance coverage may be limited or unavailable for certain types of disasters or in specific regions

Limitations on insurance coverage

All insurance policies have limitations on their cover. This is usually in the form of contractual terms called ‘exclusions’.

Disasters and other significant risks that may be  excluded by insurance policies include:

• disease – policies may not cover loss arising from certain types of disease. This could include contagious viruses such as COVD-19. You should speak to your organisation’s insurer or insurance broker about whether any cover could be available if you are required to close your business because of things like an outbreak of disease.
• terrorism –loss arising from terrorist incidents is typically excluded in insurance policies issued in Australia. In general, terrorism is a type of disaster for which insurance cover is not easily obtained. There are limited circumstances in which, by operation of law, an insurer must provide cover under their commercial property insurance policies for damage caused by terrorism.
• war and civil unrest –insurance policies typically exclude cover for loss arising from war, invasions, rebellions, insurrections, civil unrest and similar issues.
• nuclear and radioactive contamination – insurance policies typically exclude cover for loss arising from ionising radiation and radioactive contamination from nuclear sources (including fuel, weapons, waste, etc.), and from properties of nuclear material.

Preparing for a disaster – insurance checklist

Before a disaster, like a flood or a bushfire, an organisation can take steps to make sure its insurance policies are adequate.

Each year, some insurance claims are denied, or organisations get less than expected. Many organisations discover too late that they are underinsured. Often organisations only find out they have a problem with a policy when their insurance claim is denied.

If you are preparing for a disaster, complete an insurance check-up to get started.

Managing the increasing costs of insurance due to disasters

Factors that determine the cost of an insurance policy include the amount of coverage required, the excess payment that applies if a claim is made, market conditions and the location where protection is required. Areas with higher rates of crime, natural disasters, or accidents may have higher insurance costs.

The costs of insurance in the face of an increased likelihood of disasters are significantly influenced by:

• disaster frequency and severity – regions with a higher frequency or severity of disasters, such as floods or bush fires, will generally have higher insurance premiums
• historical claims data – insurers analyse past claims data to assess the risk of future losses in a particular area (areas with a history of frequent or costly disasters may have higher premiums)
• climate change – the increasing frequency and intensity of extreme weather events due to climate change can lead to higher insurance costs

To mitigate the impact of rising insurance costs due to disasters, organisations can:

• re-evaluate insurance requirements – consider what coverage is adequate and whether to nominate a higher excess to secure a lower premium
• explore alternative coverage options – consider options like self-insurance
• implement risk mitigation measures – taking steps to reduce the risk of property damage (such as installing smoke detectors, storm shutters and flood barriers, upgrading electrical systems, applying fire-resistant materials or improving drainage) can help lower premiums
• consider government assistance – some regions offer government assistance or subsidies to help with insurance costs
• shop around – comparing quotes from multiple insurers can help you find the best deal
• bundle insurance policies – combining multiple insurance policies can result in discounts
• communicate – if you're facing financial hardship, discuss options with your insurer; be aware of changes in your policy or coverage options

Cancelling insurance if your organisation has closed due to a disaster

If your organisation has stopped its activities, temporarily or permanently, due to a disaster you may want to cancel insurance policies where it’s possible to obtain a refund or to ensure an insurance policy is not automatically renewed.

Insurance policies usually cover a period a time (for example, one year) and a premium for the period is paid. Some insurance policies cannot be cancelled.

Depending on the terms of the policy, your organisation may be able to cancel a policy and get a refund of some of the premium paid.

In assessing whether your organisation may or will cancel an insurance policy, consider:

• policy terms – the specific terms of the insurance policy will determine the cancellation process and any potential penalties. Some policies may include provisions for cancellation due to disaster-related closures
• possible refunds – if the insurance policy is cancelled before the end of the coverage period, the insurer may provide a pro rata refund based on the time remaining on the policy (ie. any unused portion of your premium minus any applicable cancellation fee and any government taxes and charges)
• outstanding claims – any outstanding claims must be settled before the policy can be cancelled
• future plans – if the organisation plans to resume operations in the future, it may need to maintain insurance coverage to protect its assets and liabilities

Consult with your insurance provider to understand the specific cancellation procedures and any potential consequences.

When cancelling insurance due to a disaster-related closure, the process typically involves the following steps:

• notify the insurer – contact your insurance provider and inform them of the closure and your intention to cancel the policy
• provide documentation – you may need to provide evidence of the disaster and the closure, such as news reports or official government documents
• settle outstanding claims – any outstanding claims must be resolved before the policy can be cancelled
• request a refund – if applicable, request a pro rata refund for the remaining portion of the coverage period

Potential consequences of cancelling insurance due to a disaster may include:

• loss of coverage – cancelling the policy means you will no longer be protected against future losses
• difficulty reinstating coverage – if you decide to resume operations and need insurance again, you may face challenges reinstating coverage or obtaining favourable terms
• potential penalties – depending on the policy terms, there may be penalties or fees associated with cancelling the insurance

It's important to carefully evaluate the potential consequences of cancelling insurance before deciding what to do. If you're unsure about whether to cancel or maintain coverage, consult an insurance professional who can provide guidance based on your circumstances.

Insurance cover for an organisation’s volunteers during a disaster

Insurance policies may not cover an organisation's volunteers during a disaster.

Most standard liability insurance policies are designed to protect the organisation itself and its employees, but they may not extend coverage to volunteers.

It’s important to remember that:

• workers’ compensation insurance doesn’t usually cover volunteers, and
• public liability insurance may cover injuries a volunteer causes to others but may not cover injuries suffered by volunteers themselves

As a result, volunteers can often fall between the cracks as they aren’t covered by an organisation’s insurance policies. If your organisation has public liability insurance, review the policy terms carefully to determine if and the extent to which volunteers are included.

To protect volunteers, your organisation may need to secure volunteer personal accident insurance.

Volunteer personal accident insurance typically covers volunteers for accidental personal injuries that they suffer while doing certain volunteer work for the insured organisation. The policies usually pay compensation for death or injury, and may pay certain medical expenses.

Whatever your organisation decides, let all volunteers know what they are covered for and what they aren’t, and the process for making a claim. If there are any extra costs payable, make sure you are clear about whether the organisation or person will have to pay.

Ensure that when a volunteer engages in activities on behalf of the organisation, they operate within the scope of what the insurance covers. This will protect both the volunteers and organisation in the event a volunteer needs to file a claim.

Insurance implications for working remotely during a disaster

An employer may be liable for injuries to workers who work remotely.

In each jurisdiction in Australia, it is compulsory for businesses with workers to have statutory workers compensation insurance cover. A ‘worker’ is an employee, but may also include certain contractors. Despite  volunteers being considered a ‘worker’ under the WHS Act, some workers compensation insurers may not classify volunteers as such.

Volunteer personal accident insurance is advised to protect volunteers who are injured when working remotely.

Your organisation should review its insurance policies to confirm whether its workers (including volunteers) are covered for injury, damage and liability which occurs when they are working remotely.

If your organisation shifts to employees and volunteers working from home, you may need to discuss this with your insurer.

Your organisation may also want to remove cover from its insurance if it does not need it any more. This could help reduce the cost of your insurance.

For more information, see:

• Disaster Legal Help Victoria – Insurance – storms and floods
• Australian Financial Complaints Authority – Floods and storms disaster support
• Justice Connect Disaster Legal Support Resource Hub – Insurance and disasters in NSW and Insurance and disasters in Victoria – These resources help community workers and volunteers connect people in disaster affected communities with legal help by identifying when someone has an insurance legal problem and where to refer them for appropriate legal support.
• NSW Government guide to making insurance claims
• the NSW Government’s guide to preparing a business continuity plan (Prepare for the unexpected - Build a Business Continuity Plan) includes an insurance plan

Disclaimer: These resources provide general information about legal issues that may arise for not-for-profit organisations in managing disasters. This information is a guide only and is not legal advice. If you or your organisation has a specific legal issue, you should seek legal advice before deciding what to do. See full disclaimer and copyright notice.

The content on this webpage was last updated in December 2024.

Apply for free legal help

Apply now