Water Loss Claims and the Misconceptions of What’s Covered or Not

Jul 28, 2017 | Personal Insurance

Water Loss at a Loss

Did you know that water loss claims are the second-highest reported claim in Colorado after hail? Did you know that less than 25% of water losses are covered by your homeowner’s insurance? How can you know when to file a claim if you don’t know how you’re covered? First, you need to know what different types of water losses there are, which ones could be covered, and how to find if that coverage is included or needs to be added to cover your home.

There are five common water losses that homeowners may encounter:

  • flood water
  • busted pipe
  • slow leak
  • overflow
  • water/sewage back up

Only two of these losses are covered on a standard homeowners’ insurance policy. Do you know the difference between each loss and why one would be covered and the other not?

Flood Water

The National Flood Insurance Program has established a legal definition for flood as a general and temporary condition where two or more acres of normally dry land or two or more properties are inundated by water or mudflow. The cause of the flood is generally a natural occurrence, often weather-related. Damage caused by flooding is not covered on your homeowners’ insurance.

A property owner can purchase a separate flood insurance policy, the majority of which are regulated by the Federal Emergency Management Agency (FEMA) an agency of the United States Department of Homeland Security, and they have limits of coverage for the building and contents. The primary factor with the cost of flood insurance is if the flood zone the property is located on will dictate the premium.

Busted pipe and slow leaks

These two can often be confused and thought of as the same loss, however, water damage caused by a busted pipe is covered and water damage caused by a slow leak is not. Busted pipes can occur due to various reasons such as a frozen pipe, drilling through a wall cavity and striking the pipe, etc. Slow leaks are associated with neglect of wear and tear. Many water pipes are located behind the drywall in the wall cavities and are not accessible to update or maintain, and therefore, can be a cause for frustration for homeowners when there is a leak and it is not covered by homeowners insurance.

Often, slow leaks can be caught early and remediated quickly and at a low cost, however, knowing the signs of a slow leak are not only prudent but also imperative. Some early signs to watch for are warped or bubble paint or drywall, discolored flooring (sometimes red-brown), mold growth, spongy surfaces, discolored water circles on the ceiling, cracks, moldy or musty odors, temperature changes in a room, dripping faucets, reduced pressure in faucets, drainage flowing away from your property, and sinkholes or flooding in your yard are a few to be aware of.

When looking for water damage, be aware of where most water will pool, generally directly below any water faucets and the base of the wall and floor. Watch for floorboards that separate from the drywall as a key indicator as well.

Overflow vs Water Back-Up/Sewage Back-Up

Many might think that toilets overflow frequently and can quickly and easily be cleaned up and not cause a lot of damage. Because of this, many may believe that damage caused by overflow wouldn’t be covered, however, the opposite is true. Overflow damage is most often associated with a toilet, and if caught immediately, can be cleaned up and not cause significant damage, however, if a homeowner were away from the home and didn’t catch the overflow before leaving on a vacation, the damage could be devastating.

Another scenario may be the overflow of a faulty appliance such as a dishwasher, refrigerator, etc. In the majority of these cases, the water loss will be covered on your homeowner’s insurance, should the blockage or break occur inside the structure of the home. 

When the cause of the damage occurs outside the physical structure of the home, outside the foundation, the loss is associated with a water back-up or sewage back-up. This may occur when storm drains or sewage drains are blocked with debris, or if a tree root penetrates and blocks the water runoff pipes. Tree roots are attracted to sewage pipes as they contain nutrients that can be used by the tree, tree roots will expand the equal distance as the branches above as well.

So follow how far the branches reach near your property and you can be fairly sure the roots below ground expand the same. If you have a broken driveway and your tree covers part of your driveway, the cause of the broken concrete could be the tree roots and also show how strong those roots are as well.

Should you have a blocked drain outside of your foundation that causes water to back up into your home, the damage is not covered by basic homeowners’ policies. As this can be a common loss, many carriers have an endorsement that can be added to your policy called water back-up or sewage back-up coverage. There is usually a limit of coverage from $5,000 to $25,000 in most cases. Adding this extra coverage is more often than not, very inexpensive.

Now that you already know the difference in the water losses, it is better that you also be aware of the common myths and hearsay about water loss claims. Having misconceptions regarding what is covered and what is not is quite common especially to those who are not familiar yet with the coverage of their insurance. Therefore, here are some examples of the common misconceptions about flood coverage.

Gradual Damage

The misconception and confusion about gradual damage are very common. More often than not, homeowners who file their claims that are being denied have no idea why their claims are not valid. Most think that as long as the claim is something that they just found out, then it should pass as a valid claim.

Let us set an example, You found out that your house’s roof has holes and your ceiling has a leakage, as a result, your ceiling is about to fall all of a sudden. You honestly just noticed it because you are always not at home and you have no time to check everything in your house. So you file a claim knowing it will be covered, but to your surprise, it was not. 

Always remember this: “ Any water damage that is not from a sudden accident, is not covered. “ That being said, if your roof has holes that cause for your ceiling to collapse, it only means that the leakage has been happening for quite some time already. Even if you say that you are not aware of it, still, that is your house and you are in charge of your property’s maintenance. 

Examples of Gradual Damage

Here are the examples of the gradual damages that lead to denial of claims:

  • Corrosion of metal, stones, and other materials 
  • Deteriorating parts of the house like roof, ceiling, pipes, and flooring.
  • Water damage that is caused by cracks in the foundation of the house or cracks from the ground caused by the roots of trees.
  • Faucets and plumbing 
  • Deteriorating electrical wiring in the house due to poor maintenance 

Now the big question is: When Does your Homeowners Insurance Cover Gradual Damage?

Gradual damage will only get covered if the reason is from the previous qualified claim. For example, a tree fell on your roof that causes holes. Your insurance company covered the damages because it is included in the qualified perils.

But, after a couple of months, you notice that your ceiling has molded. After it was checked by the insurance company, they verified that it is from the moist caused by the holes from your roof. In this case, even though it is gradual damage, it will be covered by your insurance since it was caused by a qualified claim. 

Initial Damage and Resulting Damage

The terms initial damage and resulting damage has different meanings in insurance. Here are examples to identify the difference between the two:

  • A flood caused by a broken washing machine- the reason for this is the “ wear and tear “ that is why your washing machine will not be covered by your insurance. However, the resulting damage like flood and mold might be covered.
  • Broken water tank-  again, even if the reason for the breakage of the tank if due to wear and tear, the resulting damage might also be covered by your insurance

As long as it is listed in the coverage of your policy that “ Water damage caused by broken appliances, tank, or pipe is covered.” then these resulting damages might be covered. Hence, you must discuss all of the coverage of your insurance policy with your insurance agent.

Mold caused by water damage

Having mold infestation is pretty common after water damage in a house; and the most unfortunate part there is that it is not always sure that it will be covered by a standard homeowners’ insurance. But, hold your horses! Because although there is no certainty about the mold being covered, still, there might be a chance for your insurance provider to cover it depending on what causes the mold.

  • When does mold get covered?

Molds from water damage caused by a qualified peril are covered by your homeowners’ insurance. For example, molds from burst pipes are covered because it is considered as an extension of water damage.

Also, burst pipes are sudden incidents, meaning, the homeowner is probably not aware of the busted pipe and it is an unforeseen event. Generally, homeowners insurance covers up to $5,000 for mold removal.

If you wish, you can even add a floater that is offered by most insurance companies to ensure extra coverage for molds. With all that being said, as long as the reason for having molds in your house is not from being neglectful, then mold problems can be covered by your home insurance.

  • Molds due to neglectfulness are not covered.

Molds caused by a busted pipe that’s been leaking for months are certainly not covered. This scenario is very common to many homeowners. Owners often think that slow leaks don’t cause much damage. But according to FloodSmart.gov, even just an inch of flood damage can cost more than $25,000 in damage, while $30,000 is the average claim from homeowners who have flood coverage. 

Let say, a pipe in your home has been leaking for months already. You are well aware of that but chose to ignore it thinking that minor flooding wouldn’t cause much damage to your house. This belief can create more problems more than you think. Because even minor flooding can cause severe damage to your possessions and house itself. 

Molds caused by leaking pipes are not covered by homeowners’ insurance. That is why you should always make sure that all of the piping in your home is secured. Also, it’s best to do preventions, like keeping your home dry, and if you notice any leaks make sure to fix it as soon as possible.

However, some states are naturally humid like Louisiana and Florida. If you happen to live in this area, be extra vigilant in keeping your home dry by always checking the most prone areas in your house to get moist like the bathroom, basement, and crawl spaces. 

Flood-prone areas are the only ones who need flood insurance

This thinking or belief is incorrect! According to FEMA, more than 20% of flood claims are houses that are not even from a flood-prone area. That being said, though the location is a big factor for your house to experience a flood, still, that will not make your property flood-free even if you are living in a low-risk flood location. It is because every property can experience a flood, and that is a fact. 

Buying flood insurance may be mandatory depending on where you live. Houses that are located in high-risk areas might be required by their lenders or federal law states to carry flood insurance.

Also, if you happen to receive federal disaster assistance in the past, there is a big chance that your state requires you to carry flood coverage. However, this is not only applicable to flood-prone areas, because even when you are living in a place that is not considered as high risk, still you can have flood insurance added to your standard homeowners’ policy. 

The Bottomline

Understanding all the various intricacies of your insurance policy may make your eyes water over, however, should you have any concerns about your coverage, be sure to contact your agent and voice them. If you do not have an insurance agent, reading through your policy documents and having them available in a safe place is highly encouraged. We can also help review your options that suit your needs. Contact us today!