Valued Policy Law in Australia 2025: Key Updates for Property Owners

In 2025, Valued Policy Law (VPL) is gaining attention across Australia as property owners, insurers, and policymakers adapt to a changing risk landscape. With climate-driven disasters and shifting insurance regulations, understanding VPL is more critical than ever for anyone insuring a home, business, or investment property.

What Is Valued Policy Law and Why Does It Matter?

Valued Policy Law requires insurers to pay the full insured value stated in a policy in the event of a total loss, rather than calculating payout based on the property’s actual cash value at the time of loss. In effect, it eliminates post-disaster disputes over a property’s worth and gives policyholders certainty about their coverage.

• Certainty in Claims: If your property is insured for $800,000 and a bushfire destroys it, you receive the full $800,000—no haggling, no drawn-out assessments.

• Reduced Litigation: By locking in the payout, VPL reduces the risk of lawsuits between policyholders and insurers over valuation disagreements.

• Potential for Over- or Under-Insurance: The law places responsibility on policyholders to ensure their insured value reflects market realities.

While VPL has long been a feature of some international insurance markets, its adoption and application in Australia is evolving with recent regulatory and climate-driven pressures.

2025 Policy Shifts: VPL’s Expanding Role in Australia

The past few years have seen a surge in catastrophic weather events—floods in Queensland, bushfires in New South Wales, and cyclones impacting the Northern Territory. These disasters have prompted a review of insurance practices and led to renewed discussions about the merits of VPL.

Key 2025 developments include:

• State-Level Adoption: While no national VPL exists, several states are trialling VPL requirements for residential and commercial property insurance. Queensland, for example, is piloting VPL for cyclone-prone regions following devastating 2023–24 storm seasons.

• ASIC Guidance: The Australian Securities and Investments Commission (ASIC) has issued new guidance urging insurers to make VPL policy terms clearer and to provide better pre-policy valuation tools to consumers.

• Building Cost Inflation Adjustments: In response to construction cost volatility, some insurers now offer annual indexed adjustments to help keep insured values in line with rebuild costs.

These changes aim to close the underinsurance gap, which has plagued Australian property owners for years, especially in regional and disaster-prone areas.

Real-World Impacts: Winners, Losers, and What to Watch

For homeowners and businesses, the new emphasis on VPL brings both advantages and new responsibilities.

• Peace of Mind: VPL can be a financial lifesaver after a total loss, ensuring you’re not left short when rebuilding.

• Valuation Vigilance: Policyholders must review and update insured values regularly. A policy set years ago may not reflect today’s construction costs, leaving you exposed to shortfalls.

• Premium Implications: Insuring at higher, more accurate values generally increases premiums. However, the risk of underinsurance—and the financial shock it brings—can far outweigh these costs.

Case in Point: In 2024, a small business in Townsville fully insured their warehouse for $1.2 million under a VPL-backed policy. When a cyclone caused a total loss, the insurer paid out the full amount, enabling a prompt rebuild. By contrast, neighbouring businesses without VPL faced lengthy disputes and lower-than-expected settlements.

Looking ahead, property owners should watch for:

• State announcements on mandatory VPL in high-risk zones

• Innovations in online valuation tools provided by insurers

• Potential for VPL to be extended to strata, rural, and commercial properties

How to Make VPL Work for You

With VPL’s profile rising in 2025, Australians should take proactive steps to ensure it delivers real value. Here’s how:

• Review Your Insured Value Annually: Adjust for inflation, renovations, or market changes. Don’t rely on outdated figures.

• Ask Your Insurer About VPL: Not all policies include it. Confirm whether your coverage is “valued” or “market-based.”

• Use Professional Valuers: For high-value or complex properties, a formal valuation can prevent disputes and ensure adequate protection.

• Consider the Risks: Over-insurance means higher premiums; under-insurance can be financially devastating after a loss. Strive for accuracy.