Leaks and Insurance Coverage: You May Not Be As Protected as You Think
When you buy a homeowner’s insurance policy to protect your home, you expect it to cover any damage that may occur to your house. After all, that’s what insurance is for right? Well, not always. One of the most frequent questions insurance professionals get is does insurance cover water leaks? The answer is, it depends. As unsatisfactory as that answer maybe, you really need to understand your homeowner’s insurance policy and its coverages before a leak occurs. But, there are general guidelines to leak coverage that most insurers follow.
Sudden and Accidental Water Damage
Most homeowners’ insurance policies will cover water damage related to plumbing failures. This means that if a leak occurs because of a burst pipe or damaged water heater, your homeowner’s policy will likely cover it after you pay your deductible and up to the maximum amount your policy allows. Your policy may cover the damage according to three separate clauses:
- Dwelling coverage – This part of your homeowner’s insurance policy covers the actual structure of your house. In many cases, water leaks will lead to damaged floorboards, walls, and ceilings. If the leak is sudden and due to a failure in plumbing, you will typically have a dwelling coverage deductible that will need to be paid before the insurance company will cut you a check for the damages up to the maximum covered by your policy.
- Property coverage – This part of your homeowner’s insurance policy will reimburse you for personal property (i.e. televisions, furniture, clothing, etc.) that is damaged by water from a sudden leak. How these items will be covered, though, depends on how you initially set your policy up.
- A replacement cost policy means that your belongings will be reimbursed at the price it will cost to replace your items with new comparable items.
- A market value policy means that your belongings will be reimbursed at their depreciated cost (i.e. what they would be worth used on the open market).
A replacement cost policy will be more expensive upfront, but you’re sure to be able to replace your items with brand new ones. You’ll pay less each month or year for a market value policy, but you’ll also receive less in reimbursement if a leak damages your items.
Keep in mind that some belongings like jewelry and fine art are only covered up to a specified maximum that may not cover their true value. You may want to add an additional policy rider to cover a higher amount for these special items.
- Additional Living Expenses coverage – This part of your homeowner’s insurance coverage would only kick in if you are unable to live in your home for a period of time due to the water leak and resulting damage. In this event, you would be reimbursed for food, travel, and lodging expenses for the time you’re unable to use your house.
Leaks from Normal Wear and Tear
The bad news is that most homeowners’ insurance policies do not cover leaks that result from normal wear and tear or a lack of maintenance. This means that if your toilet springs a leak because you didn’t repair a crack in the base and water leaked out slowly, causing damage to the floorboards over time, your policy will probably not cover it. It also means that if a leak occurs to a toilet because of its age, this would be considered normal wear and tear leak.
For this reason, it’s important to keep your plumbing in top shape. If you have a tree with roots that like to clog your pipes, have a professional clean the pipes out at least once a year. Inspect your toilet every time you clean it for hairline cracks or potential leaks around the caulking and bolts. If you see anything concerning, either repair your toilet or replace it. This is much cheaper than the resulting damage from a slow leak that isn’t covered by insurance.
Water damage from sewage backups is almost never routinely covered by homeowner’s insurance policies, even if the backup isn’t your fault (i.e. the city sewer system gets overwhelmed due to a major storm). Fortunately, you can purchase a rider on top of your basic homeowner’s insurance policy that will cover damage from sewage backups. These riders are so inexpensive that it’s a no-brainer to buy this coverage. In the event of a major backup, you won’t have to worry about contamination or damage from the water.
Even if your policy does cover your water leak, it may not cover mold damage, which can often be quite extensive, especially if you don’t catch the leak right away. As with sewage backups, you can purchase a rider that will cover mold damage, and because mold damage claims can often top $30,000, the rider is an inexpensive way to guard against a major financial hit. Plus, you may have to leave your house for a while during mold removal or remediation, so you’ll want to make sure your Additional Living Expenses coverage is adequate for this purpose.
Keep in mind that if you live in a mold-prone area like states in the humid southern part of the U.S., mold coverage riders will be significantly more expensive than in other parts of the country. But, in comparison to the amount of money it will cost to rid your home of mold in the event of a leak, the rider is most likely still a bargain.
Check Your Policy Now
The best action you can take right now is to check your homeowner’s insurance policy for the details of water leak coverage. Your policy may be different from the standard, so don’t take anything for granted. If you find your policy lacking in any area, take steps now, before you have a leak to ensure you are covered when and if the time comes that you need to use your insurance policy.
In the end, no two homeowner insurance policies are exactly alike, and you can even customize your plan to meet your specific needs. If you’re worried about water leak coverage, do something about it now. Contact your insurer to verify coverage and add the necessary riders to cover any possible water leak damage.