Homeowners’ insurance and water are not a laughing matter. Your home shouldn’t be a liquid asset! Homeowners’ insurance may or may not cover water damage, and this is an area you need to know about before signing on the dotted line!
Today, I want to discuss a common issue that arises for homeowners: water damage from various sources and the applicability of homeowner’s insurance to it.
Data for 2015 from the National Oceanic and Atmospheric Administration showed that “wetness” (precipitation) was more than double than was dryness nationwide. Although there are periods of drought and high precipitation over time, water can be especially insidious to structures of all kinds. It can come from storms and cause obvious exterior damage. It can also be less visible water intrusion into places where water shouldn’t be and cause slower damage and mold.
Homeowner’s Insurance to the Rescue: Maybe
Some water-related damage is covered by homeowner’s policies, but not all. The language of the insurance policy as applied to the facts of how the water did damage will ultimately control whether or not the insurance coverage applies. Most disputes between you and your insurer about coverage apply due to disagreements about the causation of the damage. In other words, was the way that the water got in, and the damage that resulted, included or excluded by the language of the policy. As you can see, lots of it is fact-driven.
When Water Damage is Most Likely Covered and When it Isn’t
Let’s start with water damage that is the result of weather conditions.
The big distinction is whether the occurrence that caused water to enter can be classified as a “flood.” That’s important because homeowner’s insurance policies do not cover floods. The main reason is that the consequences of a flood are too massive for an insurer to cover relative to the amount of money that the insurer collects as premium. The magnitude of the damage is such that a flood, to be a flood is usually a nationally declared emergency. It is that big.
Definition of a Flood
The Federal Emergency Management Agency defines a flood as a general and temporary condition of partial or complete inundation of two or more acres and two or more properties of normally dry land. Flood damage can only be caused by the following water sources:
1. Overflow of inland or tidal waters
2. Unusual and rapid accumulation or runoff of surface waters from any source
3. Mud flow
4. Collapse of land along the shore of a lake or similar body of water as a result of erosion (and other technical water-related reasons with which I won’t bore you).
A flood occurs when the source of the water is a natural source, and two or more properties (in a residential area) are affected. Since your homeowner’s coverage does not cover a flood, a homeowner needs a flood insurance policy to have coverage. The good news is that they tend to be relatively inexpensive, in part because floods are relatively rare. The federal government, rather than a private insurance company, is financially responsible for the payment of claims.
The rescue of a homeowner’s insurance policy for a water claim comes in situations like this:
1. Water entering the home (such as from rain), before touching the ground.
2. A roof leak
3. A pipe that bursts
4. A malfunctioning sump pump
5. A broken hose on a dishwasher or washing machine
6. A malfunctioning toilet
It is important to understand that the “water claim” refers to the consequences of the water intrusion (ruined furniture, damage to hardwood floors, etc.) rather than to the repair or replacement of the malfunctioning appliance or equipment.
If you have further questions about your homeowners’ insurance policy as it pertains to water, the very best thing is to contact your agent to help explain. I can help you clarify language in your policy so you’re more educated before contacting the insurance company, and I encourage you to learn as much as you can. Ask me for clarification before you reach your agent or broker.