A year after the devastating bushfires in the Blue Mountains about half of the residents are rebuilding, but many of those who were underinsured have had to walk away.

Along with the 196 homes destroyed, 130 homes were badly damaged in the bushfires which burned between October 16 and 29 last year.

The Blue Mountains City Council described the bushfires as the "worst disaster in Blue Mountains history".

Despite the intensity of the fires which took hold in Springwood, Winmalee, Yellow Rock, Mount Victoria, Mount Wilson and Mount Irvine, there was no loss of life.

Just over half of the Blue Mountains residents who lost their homes have lodged development applications.

Some do not want to take the risk again or have not made up their minds. Many were underinsured.

The Insurance Council of Australia (ICA) says 1,812 claims were lodged and $187 million paid out.

The ICA says 88 per cent of people were insured for an average of $575,000 and 12 per cent had purchased total replacement policies.

Sorry, this video has expired Rebuilding not an option for some Blue Mountains victims

The man charged with the bushfire recovery and chair of the News South Wales State Emergency Management Committee, Phil Koperberg, estimates 80 per cent of affected residents were underinsured.

"So people found themselves with quite a surprise on their hands when the estimate of rebuilding under a different set of construction standards was far greater than the sum for which they were insured," Mr Koperberg said.

In a statement to the ABC, the ICA said: "The Insurance Council of Australia estimates Blue Mountains policyholders had (on average) greater sums insured than typical Australian households. However, it is likely some were inadvertently or knowingly underinsured."

The broader economic cost of the bushfires to the Blue Mountains economy, particularly in the tourism industry in the immediate aftermath of the disaster, has been estimated as in excess of $100 million with a loss of more than 500 jobs.

But the development activity connected to rebuilding is valued so far at $62 million.

A court action is under way, with 300 homeowners suing Endeavour Energy for negligence claiming sparks from a fallen power pole led to an inferno.

The ABC spoke with some of the Blue Mountains residents who have rebuilt their lives following the devastating fires of last year.

Dianne Thorpe, Winmalee

On the eve of the anniversary of the 2013 bushfires in the Blue Mountains, Dianne Thorpe is waiting to get the keys to her house, rebuilt after being destroyed in the blaze. ( ABC News: Philippa McDonald )

For the past 12 months 62-year-old Dianne Thorpe has been homeless and house-sitting.

"I've met some amazing people and some interesting animals," she told the ABC.

She says she has been overwhelmed by the kindness of complete strangers.

"A big thank you to everyone who has helped me through this," she said.

On October 17, 2013 Ms Thorpe's house was destroyed in the bushfires which burnt down 50 homes in her street, Buena Vista Road, Winmalee.

It happened so fast, there was no time to salvage anything, even the beloved family dog.

On the day after the fire the ABC found Ms Thorpe distressed and rummaging through the remnants of what had been her home for almost 30 years.

"All my clothes, everything I owned, photos of the kids, you know, all gone. Things from my mother - she's just died - things from my mother-in-law - she's gone - things from Megan's, my daughter's wedding that's coming, it's all gone," she said.

"I didn't even have a toothbrush."

It was traumatic too.

"Through winter I couldn't use an open fire. I couldn't do that," she said.

Now Ms Thorpe is just weeks away from moving back into a new home.

She is a bit out of pocket, but for the most part insurance has covered the construction of her new home.

"I feel sorry for the people in Victoria. A lot of them can't go back, they can't. But this, at least we've got a light at the end of the tunnel," she said.

"I just love it. I love the neighbours, the birds and the bush. I'll take the bushfires, but I'd rather live in the bush."

Ms Thorpe's new house is so close to the bush, she's had to rebuild under a new code, to ensure it is more flame retardant in the event of another fire.

"We've got the huge water tank down the back, that's one of the stipulations - that we have to have for access for the Rural Fire Service," she said.

"We've got shutters going on three sides of the house on all the windows. So if there is an emergency we could pull those down.

"The glass is thicker. The roof's been specially made so that there's no little cracks for sparks to get in."

Three hundred homeowners are suing Endeavour Energy for negligence claiming sparks from a fallen power pole several streets away led to an inferno.

"Power poles don't belong in the mountains," Ms Thorpe said.

"They've replaced them all [since the fires] and we said 'why not put them underground?', they said 'no it's too expensive'."

Leila and Brett Thomson, Winmalee

On the eve of the Blue Mountains bushfire anniversary Brett and Leila Thomson are rebuilding their home. ( ABC News: Philippa McDonald )

Leila Thomson was at work and her husband, Brett, had been on night shift when all hell broke loose in Emma Parade, Winmalee.

"It was a pretty windy that day, I think it was 90 kilometre winds. I'd never experienced a bushfire before and didn't think too much of it, didn't think there was any immediate threat," Mr Thomson said.

"Twenty minutes later a neighbour ran across the road and said 'the fire is coming'.

"I could see a number of trees on fire. I believe a gas bottle exploded in one of the houses just a few doors down and then one of the houses down the street started to light up and I thought 'oh it's probably time to go'."

With his neighbour, Paul Hollier, he door knocked others in the street "telling them to get out as soon as possible".

It has been a tough year for the couple who had only been living in their new home for six months when the fire swept through.

"We're grateful for the support of family, friends and charities. Without the general public's overwhelming support – emotional and financial - we couldn't have got through it the way we did," Mr Thomson said.

"For a matter of months we were paying our mortgage and didn't have a home."

The Thomsons were covered for the replacement value of their home and construction of the frame is well under way.

"Originally the goal was for completion at the end of the year, but with construction there's always delays. We're hoping for then but expecting January or February," Ms Thomson said.

She is now expecting the couple's first child.

"We wanted a baby before the fires, so we're having one now," Mr Thomson said.

"We're expecting a son, he's supposed to be born on the October 16, which is pretty much one year after the fires."

Paul Hollier, Winmalee

On the eve of the Blue Mountains bushfire anniversary, Paul Hollier has not been able to rebuild his home because his insurance did not cover the cost. ( ABC News: Philippa McDonald )

As a long-time resident of Emma Parade, Winmalee, Paul Hollier headed up the street's Community Fire Unit.

On the afternoon of October 17 he played a major role in evacuating residents from the street, but he could not save his home.

"It was an ember attack. It started less than a kilometre from here, it was that quick," Mr Hollier said.

"We made the decision to evacuate the street, just to get the people out as quick as we could.

"It was minutes and the houses just caught on fire one after the other as I backed out of the street.

"Fortunately there was no loss of life around this whole area.

"It probably took 20 minutes for the fire to demolish it, it was just sad not being able to do anything.

"We were so well trained. I had a pump, two small storage dams, I had water laid on. I didn't get time to start the pump, it was that quick I didn't get time to put shutters on the house that I had organised."

His house was full of memorabilia.

"Fortunately I had a few negatives stored underneath a little cubby hole, under a slab underneath the house and a small disc of video that I put under there just in case," he said.

"The dog, she survived she went underneath the slab of this little cubby hole, but we had to put her down a few hours after the fire, she had smoke inhalation."

A year on Mr Hollier is standing on the concrete slab where his home had stood.

"It was a pretty home; an Edwardian, high-pitched home that we brought the kids up in. Lots of fun times. We would like to have got back into it again after the fires," he said.

His home insurance payout has fallen way short of its replacement value.

"The quotes came in at about $650,000 to $680,000 and that was still with me doing some of the work, probably about $700,000. And we were covered for a little bit more than half of that," he said.

"I had no idea I was in a flame zone category which is all this area here. When I looked at the policy again, we weren't covered for flame zone for those extra building costs and that was pretty scary."

There was another aspect Mr Hollier said he struggled with.

"We'd been with our insurer for a long time and each year they'd increment the premium and the lump sum payout but in my opinion it really hadn't kept up with the value of homes in the area and it was substantially lower than it should have been," he said.

Mr Hollier has not been able to rebuild on the land.

"It seems to be a very common story around our neighbourhood. That's a really big issue," he said.