Does Homeowners Insurance Cover Water Damage?

Home insurance claims for water damage are extremely common. But there are many different forms of water damage. Whether or not you're covered depends on your policy and the type of water damage.

house with flood water inside

If your house faces water damages, you're not alone. According to the III, in 2015 more than 45 percent of home insurance claims were due to water damage. About one in 50 homes file claims for water damage every year.

But water damage is a wide-ranging term. From leaky faucets and frozen pipes to moldy basements and overflowing sewers, water can cause plenty of damage.

A home insurance policy covers many forms of water damage, but there are plenty of exclusions. That includes all flood damage. Only flood insurance, separate from home insurance, covers flood damage.

It's important to understand flood damage as defined by your insurer to avoid confusion. This term refers to acts of God like hurricanes and rainstorms. If a pipe bursts in your bathroom and fills your home with standing water, you might think you have a flood on your hands. But in the eyes of your insurer, that burst pipe doesn't qualify as a flood.

If you thought your homeowners insurance pays for flood damage, you're not alone. Surveys show that 43 percent of people mistakenly believe that home insurance covers flood damage.

In this article, the term 'flood damage' refers to the aforementioned acts of God. The term 'water damage' refers to conventional damage like overflowing sinks, burst pipes, faulty appliances, and more. It's an important distinction.

This article covers common types of water damage, whether they're covered, and how you can avoid water damage in the future.

Common Causes of Water Damage

First, let's cover some of the most common types of water damage. There are three categories for forms of water damage. Insurance companies commonly use these terms:

  1. Drainage backup: This occurs when water backs up from a drain and into your home. If your sewage or drainage runoffs clog up, the water has nowhere to go but back into your home. Antiquated sewer systems, poorly maintained drainage, and invasive tree roots can all cause sewer backups.
  2. Accidental discharge: As the name suggests, this refers to a sudden discharge of water into your home. This is a very common and wide-ranging cause for water damage. Clogged sinks, appliance leaks, faulty pipes, and more can cause accidental discharges.
  3. Flood: Hurricanes, storms, and intense rainfall cause floods. This can be confusing, because you can technically flood your home after a drainage backup or an accidental discharge. However, the term 'flood damage' almost always refers to natural disasters or acts of God.

Beyond the causes of water damage, it's also vital to understand what kind of water you're dealing with. There are three classifications:

  1. Clean: This is the water that comes out of your faucet. It's clean and safe to drink. It doesn't pose an immediate health threat. Clean water damage usually comes from pipe leaks or faulty appliances. It's usually the simplest and least expensive water-type to repair, depending on the extent of the damage. However, if you don’t deal with standing clean water, it can quickly become hazardous.
  2. Grey: This water includes chemical-laden discharge from dishwashers, showers, washing machines, and sinks. Grey water is lightly contaminated, and it can damage your home at a faster rate than clean water. If you leave grey water untouched, it can become black water.
  3. Black: This water comes from raw sewage, septic tank leaks, or standing water. Black water represents an enormous health risk, and the damages can condemn your home. The water is laden with bacteria and harmful contaminants.

Now that we've covered causes and types of water damage, it's time to assess whether you're covered.

Is Your Water Damage Covered by Insurance?

This is the million-dollar question. It’s important to assess water damage on a case-by-case basis. The two most important points you have to consider are the cause of the water damage, and the details of your policy.

Remember, your home insurance policy never covers flood damage. Only flood insurance covers flood damage, and it’s not part of a home insurance policy. If your water damage is due to a flood, your normal policy won't pay for any damages to your home.

Depending on your policy, water damage may or may not be covered. Your first step should be to find out whether your policy is covers either named perils or open perils. On a named perils policy, your policy only covers damages from specifically listed causes. An open perils policy, on the other hand, covers anything that isn't on the exclusion list.

Your policy comes in two main parts: the house's structure, and your personal belongings. Some policies will provide named perils coverage for one part and open perils for another part. It's possible your possessions are covered for water damage, but your home isn't, or vice-versa.

Most homeowners have one of three home insurance policy types. Here's how each policy type handles perils and water damage:

  1. Basic Form (HO-1): True to its name, this is the most basic home insurance policy type. That also means it offers limited coverage. As a named perils policy, water damage isn't explicitly covered.
  2. Broad Form (HO-2): This policy expands on the HO-1. It's also a named perils policy. Unlike HO-1, HO-2 covers damages from accidental water discharges. That coverage is relatively minimal, however, and doesn't cover backups, foundation leaks, or slow leaks.
  3. Special Form (HO-3): This is the most common homeowners insurance policy. It's a mix of open and named perils. The house structure has open perils covers, while personal property has named perils coverage. Fortunately, there’s coverage for accidental water discharges for both structure and belongings. Backups, leaks, and foundation flooding are not covered.
  4. HO-5: This open perils policy is one of the most comprehensive home insurance plans available. It covers sudden water damage. Additional water damage coverage (water backups, slow leaks, and foundation leaks) is available on most HO-5 plans, but it's not included by default. In some cases, homeowners may need to add endorsements for full water coverage.
  5. Townhome/Condo Insurance (HO-6): This policy is very similar to a standard home insurance policy, but for townhomes and condos. Like other policies, it covers damage from accidental water discharges and overflows. Without endorsements, there’s no coverage for other forms of water damage.

Curious if you have water damage coverage? Read your policy's declaration plan. Find out what type of policy you have and whether coverage is on an open or named perils. Check your list of exclusions and coverages.

Water Damage Exclusions and Denials

Water damage claims are extremely tricky for both homeowners and insurers. There's a lot of exclusions and technicalities to consider when filing a water damage claim.

A common source of conflict is your insurer's definition of negligence and maintenance. Insurance companies commonly deny or only partially pay for claims caused in part by negligence or faulty maintenance. This happens often after water damage.

For example, there are plenty of plausible exclusions for a pipe leaking in a wall:

  • If it's an ongoing slow leak
  • If the leak is a result of normal wear and tear
  • If the pipes aren’t properly installed
  • If plumbing work was done by uncertified contractors

Another common conflict is to what extent your damages are covered. Most insurance policies won't cover the source of the water damage. Imagine your washing machine malfunctions and leaks water all over your hardwood floor. Your floor is warped and your washing machine is broken. You can file a claim for the damages to the floor, but you won't get reimbursed for your washing machine.

Water backups from outside drains and sewers happen often. But most policies don’t cover these events. This can be particularly difficult, because homeowners are rarely to blame for said damages. On top of that, raw sewage can devastate a home.

This lengthy list of exclusions and denials can cause consternation for homeowners.

What If Your Water Damage Claim Is Denied or Low-Balled?

Are you having trouble getting a fair result from your home insurance company for your water damage claim? Unfortunately, this is a problem faced by many homeowners.

Disputes between insurers and homeowners arise from denied claims, delayed payouts, or low settlements offers. If you're in this position, you have four options for recourse:

  1. Renegotiate: There's an old saying: never accept the first offer. This adage extends to insurance claims. Not everyone knows this, but claims are very negotiable. If you're not happy with the amount offered, present a counter-offer. You're going to need some evidence in your court to help your case. That includes receipts and work estimates.
  2. Hire an adjuster: Negotiating your case with an insurance company isn't a small task. If you're not knowledgeable on building costs and insurance regulations, you might be fighting an uphill battle. Hiring an adjuster is a great way to get someone with those skills on your side. Adjusters usually take a percentage (between five and 15 percent) of your claim payout, so your financial risk isn't substantial.
  3. Hire a lawyer: If your disputed claim amount is substantial, you might need to bring out the big guns. That means hiring a lawyer to improve your home insurance claim settlement. They can expedite your claims process and directly negotiate a better result.
  4. File a complaint: Your option is to file a formal complaint with your state's insurance commissioner. Find your state's insurance regulation office here.

Get Adequate Coverage Before It's Too Late

As we covered earlier, standard home insurance policies don't offer much coverage for water damage. Considering that over 45 percent of home insurance claims are due to water damage, having adequate coverage is vital.

There are three steps you should take to prepare for the unexpected: 

  1. Understand your policy: It seems obvious, but you should study your policy's declaration page. This lays out everything you need to know about your policy. Spot potential coverage shortages. Are you covered in the event of an emergency? What types of exclusions does your policy have?
  2. Shop around: There's a good chance you bought your policy when you moved into your house. After that, homeowners often don't take the time to shop around for other insurance plans. But each insurance company offers different coverage types, exclusions, and prices. You might be missing out on a policy that fits your needs better. You should shop around and compare home insurance policies from different companies.
  3. Enhance coverage: Once you've understood your policy and compared plans from other companies, consider boosting your current coverage. If you have an HO-1 or HO-2 plan, you don't have a lot of coverage. Adding an endorsement gives you coverage for specific perils – including water damage -- without breaking the bank. You can purchase an endorsement for many different perils including earthquakes, theft, and sewer backups.

How to Avoid Water Damage

You can stop devastating water damage before it happens. Simple preventative maintenance goes a long way. Here's what you can do:

  1. Find out where your main water shutoff is. It seems simple, but a surprising number of homeowners don't know where it is. This can save you thousands of dollars in damages in the event of an unexpected discharge.
  2. Check your water bill for unusually high usage. You might have a slow leak somewhere in your home, but if it's hidden, it can take months to notice. An unnatural spike in your water bill usually indicates a leak.
  3. Install water leak alarms. These affordable devices alert homeowners when water is present. You can set them near water heaters, sump pumps, dishwashers, sinks, or any location where leaks are possible.
  4. Immediately fix any leaks, no matter how small. You'll save on your water bill and avoid potentially costly problems down the road.
  5. Get a sump pump for your basement. It'll stop considerable damage if your basement fills with standing water.
  6. Stay up to date on appliance maintenance. Your appliances should come with maintenance schedules, and you should follow them. Water heaters, dishwashers, and washing machines are leak risks, especially if they lack proper maintenance.

Frequently Asked Questions

Q: Is mold from water damage covered by home insurance?

A: If the mold is due to a named peril, you should have coverage. But many insurance plans exclude mold. HO-3 policies, for example, exclude mold from covered perils.

If the mold is a result of bad maintenance, flooding, or a preventable leak, you might be out of luck. Mold is tricky, because it can show up months after the damages occur. It's possible that you have a sudden water discharge, file a claim, clean it up and repair it, only for mold to develop months afterwards. In this case, your insurance company may try to deny your claim.

Many insurance companies mandate a specific limit for mold payouts.

Q: Does my insurance go up after I file a water damage claim?

A: Regardless of what kind of claim you file, there's a good chance your rates go up afterwards. It depends on your current policy, your home, and your claim history. But it's a good rule of thumb to assume your rates will jump.

Q: Should I pay for water damage out of pocket?

A: If the damages are minor, you absolutely should pay for a claim out of pocket. Since insurance rates usually rise after a claim, filing a claim for minor damages can end up costing you more in the long run. Paying for a claim out of pocket means your rates won't go up.

Of course, getting help after an emergency is exactly why you have insurance in the first place. If your home has substantial damage, file a claim. For more information, read our tips for handling home insurance claims.

Q: Why was my water damage claim denied?

A: This is a tough question. There are many reasons for a claim denial. The most common reasons are that the policy exclusions or negligence. Insurance policies often include many exclusions. Also, many insurance companies refuse to cover damage caused by poor maintenance.

Q: What can I do if my water damage claim is denied?

A: If your claim is denied, ask your insurance company for a written explanation of why. Study your policy and try to understand what caused the claim denial. If you think your claim result was unfair, ask your insurance company to reconsider. You'll need evidence to do it.

If that doesn't work, consider hiring a public adjuster or an attorney. Both adjusters and attorneys can help you get a better result on your claim.

Q: Does home insurance cover floods?

A: No. This is a common misconception. Home insurance plans do not cover floods. You have to purchase flood insurance separately. If you live in an area with any flood risk, it's absolutely vital that you purchase protection. If you have questions about flood insurance, read FEMA's guide on how to buy flood insurance.

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