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Homeowners Insurance – Understanding Water Damage

The key to understanding if water damage to your home is covered is based on knowing WHERE the water ORIGINATED. A homeowners policy covers water damage, but with significant exclusions and limitations. Typically a policy will pay for sudden and accidental water damage from inside water sources but will not pay for losses caused by […]

The key to understanding if water damage to your home is covered is based on knowing WHERE the water ORIGINATED.

A homeowners policy covers water damage, but with significant exclusions and limitations. Typically a policy will pay for sudden and accidental water damage from inside water sources but will not pay for losses caused by water that finds its way into your home from the outside.

Examples  of inside water sources that cause water damage and that are typically covered are inside water pipe leaks or breaks (like behind a wall or under a sink); or leaks from appliances (like hot water tanks, washing machines, or dishwashers).  Your property deductible is deducted from the covered loss.

It is important to note that it is the “damage” to your home from the water loss that is covered; NOT the repair to the actual item that failed.  Your policy pays for the necessary costs to access (i.e. cut open an undamaged wall to access a broken pipe and then pay to repair the wall) and repair the damage caused by the water.  But, the broken pipe itself, which failed because of wear and tear, decay, defective materials or methods of construction, is not part of the covered loss.  The cost to repair the pipe or appliance is your responsibility.

Let’s take a closer look at FOUR types of water damage:

  1. Roof Leaks
  2. Water Leaks Through a Foundation
  3. Water Backup Through Sewer or Drain
  4. Flood (Excessive Surface Water, Overflow of a Body of Water, Etc.)

Roof Leaks

A typical homeowners policy covers water damage caused by an accidental external cause (for example a tree branch falls on it, windstorm blows shingles off, etc.) and coverage is provided for both the roof and any water damage to your walls, ceilings, carpet, personal property, etc., subject to your deductible.

However, if the water damage is not caused by an accidental external cause and simply because the roof is old and worn out, only the damage to the walls, ceilings, carpet, personal property, etc. is covered…..the roof itself isn’t covered.

The reason that the resulting water damage to the inside of your home is a covered loss, even when a roof isn’t damaged but simply old and worn out and allows water to leak in, is because the “wear and tear” exclusion in a homeowners policy says damage first must be from “accidental direct physical loss”…BUT it also goes on to say “however, we do insure for any resulting loss.”

This makes sense when you consider that most other covered water losses result from something that failed because of wear and tear and leaked water causing damage – like a water pipe that rusts and leaks, or a hot water heater that wears out and leaks, or a water connection that gets old, splits and leaks. So, this is why insurance companies monitor and care about the condition of your roof.

Because of this exception to the “wear and tear” exclusion, an insurance company may periodically inspect the roof on a home they insure to make sure it has not worn out.  If a roof becomes deteriorated or neglected, the insurance company may insist that the roof be replaced or they will cancel the insurance policy.

For a home owner seeking insurance for the first time from an insurance company on a home they purchase or already own, the insurance company or agent will want to know the age of a roof before a policy can be written…if the roof is too old for it’s type (i.e. comp or tar and gravel roofs have a shorter life span than tile roofs), then the insurance company will refuse to write a policy. A more expensive “non preferred” policy will need to be purchased that likely will include a roof exclusion. Once a new roof is put on, then the exclusion will be removed or a new cheaper preferred policy written.

Water Leaks Through a Foundation

A typical homeowners policy excludes water damage caused by:

Water below the surface of the ground, including that which exerts pressure on, or seeps or leaks through a building, wall, bulkhead, sidewalk, driveway, foundation, swimming pool, hot tub or spa, including their filtration and circulation systems, or other structures.

To keep homeowners policy premiums affordable for everyone, coverage is not provided for losses that can be prevented by sound building practices or as a result of normal wear and tear, rather than sudden and accidental events.  So, the main reasons it is necessary to exclude “water below the surface” from a policy are:

  1. Current construction methods require the foundation to allow water to drain away from the home. Older homes may not have followed these methods or due to improper grading, the shifting of the soil or past severe water events, water may find a path to begin collecting underground next to the home.    If the intrusion of water through foundations were covered by insurance, then a home owner would have no incentive to correct the problem.  Covering these events would give rise to repeated claims after every periodic severe weather season.
  1. Over time, every foundation settles, cracks, and eventually deteriorates.  This “wear and tear” may require a home owner to excavate around the foundation (and basement) to place drain tiles and patch/re-seal the foundation and basement concrete walls.  Again, if this type of water loss was covered then a home owner would have no financial incentive to repair or improve their home.


Water Backup Through Sewer or Drain

Most homeowners’ policies exclude or restrict water damage caused by the backup of sewers or drains.  The provisions vary from company to company, but usually states that water damage is excluded if caused by:

Water or water-borne material which backs up through sewers or drains or which overflows or is discharged from a sump, sump pump or related equipment.

This exclusion is talking about “overflows” of water from sewers (like out of toilet bowls) and “backups” from drains (like floor drains and sinks).   The source of the water or sewage may be “off premises” from a plugged public sewer system or caused by water inside the home that is left on or stuck on which overwhelms a drain system that is plugged or restricted.

It is important to mention that almost ALL policies sold by Farallone Pacific Insurance include coverage for sewer or drain water backup. The companies we represent tend to offer policies that are more comprehensive than those sold by our competitors and automatically include coverage. If the company doesn’t include the coverage automatically, we offer our clients the opportunity to purchase coverage via an endorsement.

Water back up from sewers or drains damage can be costly, both the cleanup and repair, so

why does a homeowners policy exclude coverage for sewer or drain water backup?

  1.  Water backup losses are extremely common but preventable with maintenance and preventative measures by the home owner.  Water losses from plugged up toilets and clogged up drains can be prevented or minimized when home owners are observant and promptly repair sticking toilet bowls and clogged, slow running drains.
  2.   Water systems require periodic maintenance or reinvestment by the home owner. Over time, every water drainage system becomes restricted with rust, deposits and accumulated debris. Drain fields become saturated and tree roots interfere with drainage.  Without preventative maintenance, slow running drains won’t handle normal water flow or plug up completely.
  3. Off premises sewage backups can be prevented with the installation of drain backflow preventers that are installed on your drain line.  Unfortunately, many older homes did not have these preventers installed.
  4. During flooding the water table rises and first causes water backup through sewers and drains.  Since “flood” is an excluded coverage, the unendorsed homeowner’s policy has this exclusion.

Flood (Excessive Surface Water, Overflow of a Body of Water, Etc.)

A homeowners policy excludes water damage caused by flooding, more specifically:

 a)  Flood, surface water, waves, tidal water, tsunami, seiche, overflow of a body of water, storm surge or spray from any of these, whether or not driven by wind, including hurricane or similar storm.

 b) Release of water held by a dam, levee, dike or by a water or flood control device or structure.

There are two primary reasons it is necessary to exclude “flood” from a homeowners policy:

  1. Flood losses are often devastating natural disasters that cause more property losses than any individual insurance company can financially withstand.
  1. Most surface water losses can be prevented with proper landscaping of a property that drains water away from structures.   If these losses were covered, property owners would not go to the expense of preventative landscaping for the extreme weather events that occur in long cycles – like every ten, twenty or thirty years.

If your home is located in a floodplain and your community participates in the National Flood Insurance Program (NFIP), you can purchase flood insurance coverage. Your lender may require flood insurance as a condition of your loan.  The NFIP is administered by the Federal Emergency Management Agency (FEMA), which works closely with nearly 90 private insurance companies to offer flood insurance to home owners through authorized property and casualty insurance agents

If you are interested in learning more about water damage coverage, exclusions and limitations or have other insurance related questions, please contact Ramona Johanneson at rjohanneson@fp-ins.com or 415-493-2502.