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.
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.
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:
Beyond the causes of water damage, it's also vital to understand what kind of water you're dealing with. There are three classifications:
Now that we've covered causes and types of water damage, it's time to assess whether you're covered.
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:
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 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:
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.
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:
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:
You can stop devastating water damage before it happens. Simple preventative maintenance goes a long way. Here's what you can do:
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.
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.
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.
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.
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.
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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