By Elizabeth Steele Homeowners Insurance December 17, 2019

Water Damage and Homeowner’s Coverage

According to Insurance Business Magazine, one in 50 homeowners filed a water damage claim between 2013 and 2017, which represents a frequency rate of about two percent.

Furthermore, they report that the average payout for each water damage claim was about $10,000, totaling more than $13 billion over the five-year span.

What if this happened to you? Would your homeowners policy provide sufficient coverage for a water claim? Or, would you be responsible for thousands worth of repairs?

The short answer: it depends.

Here, the team at IHS Insurance Group will discuss why and how you can ensure that you’re adequately covered.

When Are Water Losses Covered or Excluded Under a Homeowners Insurance Policy?

Most homeowners policies are written on an HO-3 form.

This means that the home itself—the building structure—is automatically insured on an all-risk basis. In other words, coverage is available unless expressly excluded by the policy language.

On the other hand, HO-3 forms cover personal property on a named perils basis. This means coverage is not available unless the cause of loss is specifically included in the policy language.

With these details in mind, an HO-3 policy automatically excludes coverage for dwelling losses caused by certain types of water damage, as well as those resulting from mold, fungus, or wet rot.

From a personal property perspective, an HO-3 only includes coverage for losses caused by “accidental discharge or overflow of water or steam.”

IHS Pro Tip: Many insurance companies offer endorsements that expand coverage under a homeowners policy to include otherwise excluded causes of loss.

Let’s take a look at how this might work in the real world.

What Are Common Examples of Homeowners Water Losses?

Given everything we discussed above, whether or not your homeowners policy provides coverage for a water loss depends on three critical factors:

The form on which your homeowners policy is written, along with any related endorsements,
The type of property damaged, and
The details surrounding the loss,

Here are a couple of quick real-world examples:

Example 1: Burst Water Pipes

While your family is out of town for a few days, a pipe bursts inside your upstairs bathroom’s walls.

Upon returning home, you find that your entire bathroom is flooded, with damage to flooring, cabinetry, and personal property. Water even seeped downstairs and damaged sheetrock and carpeting.

Because this loss is considered “sudden and accidental,” and you reported it to your insurance company immediately after returning home, your HO-3 would likely provide dwelling and personal property coverage—less your policy’s deductible, of course.

Comparatively, imagine that instead of the pipe bursting, it only sprung a tiny leak that caused water to accumulate inside your walls over the course of several months. You only realized what occurred after noticing a wet spot on your sheetrock, and upon further examination, extensive mold growth behind.

Because an adjuster might not consider this scenario to be “sudden,” your homeowner’s policy might not provide coverage. And even if they determine that coverage is available, most homeowners policies come with a $5,000 limit for mold-related claims.

Example 2: Rising Flood Waters

Your dream home sits on a beautiful riverbank. During an unusually rainy month, water breaches the banks creeps into your home and soaks the entire first floor.

Because flood is an excluded peril under an HO-3 form, your policy likely wouldn’t provide coverage in this scenario. Here, you’d need to purchase a standalone flood policy to regain coverage.

On the other hand, imagine that instead of making its way into your home, the river’s rising waters weakened a nearby tree’s roots. It eventually fell over, landed on your roof, tore open a large hole, and allowed rainwater to enter your master bedroom.

In this example, even though floodwaters caused the tree to topple, the tree is what actually damaged your home and allowed rainwater inside. As such, your claim would likely be covered under the peril of “falling objects.”

Important note: Keep in mind that nothing’s set in stone. Whether or not your water-related claim is covered depends on the specific circumstances surrounding that claim, your particular homeowners policy, and the adjuster’s determination based on these factors.

Are Partial Water Claims Covered Under Homeowners Insurance?

The short answer? Potentially.

If the deteriorated pipe from our example above leaks and damages your sheetrock and flooring, the adjuster might determine that while plumbing repairs might not be covered, the resulting damage is.

This way, you’d be responsible for paying out of pocket to repair the pipe, while your homeowners policy—less your deductible, of course—might pick up the remainder.

Do You Have Questions About Water Coverage Under Your Homeowners Policy?

Although it’s a straightforward question, whether or not your homeowners policy provides coverage for water claims is a complex process that involves a lot of moving parts.

Do you have questions about water coverage under your policy? Worried that you might need to increase limits or add an endorsement to cover your unique risk? The IHS Insurance Group team is here to help!

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