Buying a policy before an event
Some types of insurance may benefit you if they are bought in advance, such as travel insurance. Travel insurance may be purchased as soon as the deposit for the trip is paid. It usually does not cost any more to purchase the cover at this time, and the cancellation cover can start straight away.
Insurers often place embargoes on insurance policies to prevent people buying insurance when the risks are elevated or a disaster is approaching and then cancelling cover after the risk passes.
Embargoes on insurance are a normal and accepted practice, and usually apply to new policies. They take effect when events such as fires, floods and cyclones are impacting or considered likely to impact an area.
If an insured risk is imminent, the probability of that risk occurring and therefore a claim being lodged is high. Insurers would need to calculate a premium that reflects this elevated risk, rather than averaging the risk over an entire year.
However, not all insurers impose embargoes. Australia’s insurance market is large and highly competitive, and at any one time there are usually insurers who have not enacted an embargo, and property owners may be able to find cover.