1 in 50 insured homes has a property damage claim caused by water damage or
freezing each year. This works out to around 350,000 homes per year, with a $2.5
billion annual cost to insurance companies. The average claim made for water damage
is just under $7,000, although within that figure is a wide range of different claims.
Within the world of insurance, water damage is the third most common claim, with
23.8% of homeowners insurance losses being from water damage. The water damage stats are mind boggling.
By contrast, percentages of other claims are:
Wind and hail
Fire and lightning
Here’s a graph that breaks down those insurance losses by cause:
Clearly then, water damage is something you should take seriously when it
comes to your insurance policy. The purpose of this guide is to walk you
through the key steps involved in making sure your insurance company pays
out when it comes to your home being water damaged.
The key insurance policy for water damage is a homeowner’s policy (and
sometimes renter’s insurance). Generally, the two areas in which water damage is
covered is the following:
If an earthquake, a storm, or a hurricane hits your home, it’s likely that there will be
extensive water damage. In these instances, you are likely covered by your
In the aftermath of Hurricane Sandy, for example, insurance companies made over $20 billion in payouts to restore homes that had suffered (amongst other things) extensive water damage.
Importantly, flooding is not classed as a natural disaster for the purposes of home
Sudden damage refers to things like:
- Pipes cracking.
- Water mains bursting.
- Appliances breaking. For example, a dish washer or washing machine.
In each of these cases, you will be able to claim on your homeowner’s policy
for the resultant damage. The actual appliances or pipes are unlikely to be covered,
but the damage caused from the breaks would.
Not all types of water damage will be covered under your homeowner’s or renter’s
insurance. Although individual policies vary (and therefore you will need to read
your own policy carefully or discuss with a broker) the following are generally not
covered under a standard policy.
This refers to any type of damage that occurs over a longer period of time. Most
insurance policies won’t cover this, on the basis that it could have been prevented.
According to the insurance companies, it’s your job as a homeowner to ensure your
plumbing system, for example, is well-maintained and regularly inspected.
If your home is flooded, the damage can be extensive. The average claim on a
flood insurance policy is $43,000. The water itself can be devastating; this is often
compounded by the fact that the water is often contaminated, meaning your home
will need to be disinfected.
- Most insurance companies specifically exclude flooding from homeowner’s policies, meaning you will need to purchase separate flood insurance.
Damage Caused by Neglect:
As with gradual damage, any damage that is caused by neglect or poor maintenance
will usually not be covered. The onus is very much on the homeowner to keep a
property in a good condition (see Long-term strategies, below, for more advice on
specific steps to take).
If your home does suffer water damage, then mold can be a long-term problem.
However, most insurance policies only cover the direct damage from water (mold
is considered secondary damage). Almost every state has passed an ISO mold
limitation, meaning that insurers can exclude mold from policies.
The following states have not passed the limitation:
If you live in a state other than the ones listed above, your policy will most likely not
cover mold damage. You can learn more about what home insurance does and doesn’t cover here.
Clearly then, most water damage is unexpected, and it’s difficult to prepare for it
(hence the need for insurance). However, there are certain steps you can take over
the long-term to firstly limit the chances of water damage happening and, secondly,
to make it more likely that you will get a payout if water damage does happen. As
shown above, the ‘neglect’ element means that the homeowner must show regular
upkeep to prevent water damage.
The following is a list of steps to take to maximize your chances of a payout.
Across the board, this is one of the best ways to demonstrate you have taken
adequate steps to maintain your home.
What this means in practice is the following:
Take before and after photos every time you undertake work on
your home. This can be as minor as cleaning work. Build a body
of evidence to demonstrate you have maintained your home.
Get receipts to show contractor work on your home. Keep these
receipts somewhere safe.
Document any changes that happen (such as minor leaks or
moving the location of appliances). These may seem mundane,
but the more evidence you have, the better.
Understand Your Policy
Insurance companies are often very clear in their policy documents about what is
and what isn’t covered. If you are in any doubt, speak to the insurance company.
Ideally, via email so you have a record of their response.
In most cases, insurance companies will follow the standard policies outlined above.
However, if you require an additional level of coverage, most insurers will add it (for
an additional fee). If in doubt, speak to an independent broker.
Twice a year, run a full inventory of your home, checking all plumbing, appliances,
and other parts that are susceptible to water damage. Again, you should document
As part of this maintenance, perform the following three checks. These are the most
common causes of what may be termed ‘gradual damage’ (i.e. insurers won’t pay
out for water damage from these sources).
- Seal Windows, Roof, and Doors. Check the sealing on your windows, roof, and doors to prevent water from seeping into your home. If any of them are damaged, either fix the sealant yourself or hire a contractor to do it (and keep a record of whatever you do).
- Check Gutters. Checking your gutters and keeping them free of leaves and other debris is one of the easiest ways to prevent water damage. If gutters get backed up, water can leak into your home.
- Inspect irrigation systems. If you have a sprinkler system on your lawn, you’ll need to check it is watertight. Leaks from these can be difficult to spot but will lead to excess groundwater, which can potentially enter your home.
- Prevent leaks from plumbing. Check that your shower, sink, and bathtub are draining correctly. If you go away on vacation, shut off the water to your home so that no gradual leaks take place while you are away. You can also utilize technology with a leak sensor app, which tells you when appliances are leaking.
HOW TO FILE A CLAIM
So, let’s say that the worst does happen, and you need to file a claim. Doing
everything in the right order will not only increase your chances of a payout but
will make the entire process a lot smoother. The first step is to make sure you and
your family are safe (by evacuating your property if necessary), and preventing any
further damage (for example, by shutting off the water).
THEN TAKE THE FOLLOWING STEPS:
- Call Your Insurance Company
Once everyone in your household is safe, you should call your insurance company’s
emergency number. Explain the problem and ask what your insurance will cover.
Your insurer may have preferred providers they can call.
2. Collect Evidence
Throughout the process, you should be taking as many photographs as possible to
ensure you have evidence to provide to your insurer. Your insurer may also ask to see
older evidence (for example, maintenance records – see Long-term strategies, above).
3. Meet with the Claims Adjuster
Your insurer may send a claims adjuster to your home to investigate the damage, its
extent, and the causes. You should prepare the evidence you have accumulated to
show to the claims adjuster. He or she will be the one who makes the call on whether
your insurance company will make a payout for the damage.
4. Find a Contractor
Once the claim has been processed, and your insurance company has confirmed it
will cover the cost of repair, it’s time to find a contractor to complete the work. The
insurance company may have their preferred providers. However, you do have the
right to use another provider. The contractor should return your home to its situation
pre-water damage (remember to take photos and document all changes).
Although water damage is surprisingly common, most homeowners don’t always take steps to either prevent it or make sure that insurers cover any damage. Regular maintenance does both.
Also, making sure you have a strong set of
records (with evidence) to demonstrate
you have maintained your home will make
it far easier for your claim to be processed
quickly and efficiently.
No one wants water damage, but, if the worst does happen, knowing
how insurance works will make it less likely your claim is rejected, and
you’re not left with (on average) a $7,000 bill.