Understanding losses suffered due to water damage can be very confusing for homeowners. Indeed, not all “water losses” are the same. As such, there are specific insurance policies and endorsements that respond to very specific homeowner losses that involves water damage.
Not All Water Is Created Equally
Let’s take a step back for a moment to understand homeowners insurance basics. All homeowners insurance losses are directly caused by something. A “Peril” is a direct cause of loss. However, there may be indirect causes of loss that caused the actual damage for a particular claim. When you think about water damage losses this way, it makes understanding how water damage claims get paid a lot easier for homeowners.
Types of Water Damage
Now let’s break down the four most common types of water damage claims a homeowner can have:
Rain Water Damage
Suppose there is a heavy thunderstorm right above your home. The high wind from the storm rips off a section of your roof. Since it was still raining at the time you were saying goodbye to your roof, the rain water poured into your home causing water damage. The direct cause of water damage in this case was wind. The indirect cause of water damage in this case was rain water, which entered through the damaged section of roofing.
Backing Up of Sewers and Drains
If the main trap in your sewer waste line gets clogged, waste water that drains into the waste line will back up and flood into your home. The direct cause of water damage in this case is a clogged sewer drain. The indirect cause of water damage in this case was waste water backing up into your home from the clogged sewer drain.
Broken Water Pipes
If a water pipe breaks in your house, running water will flood out your home. The direct cause of water damage in this case is the broken water pipe. The indirect cause of water damage in this case is running water leaking from the broken water pipe.
Flooding of Surface Waters
Suppose there is a hurricane in your area and you live near tidal waters (for example, less than 1 mile from the South Shore of Long Island). Due to the storm surge created by the hurricane, coastal waters near your home rises by 8 feet. Since your home is at sea level and you are in a flood-prone area (you don’t necessarily need to be in a flood zone mind you), tidal waters now begins to flow into your home causing severe damage. The direct cause of water damage in this case is flooding of surface water.
How to Cover Yourself Against Water Damage Losses
Now that you have a good understanding about water damage losses and how they are caused, it’s time for you to select and obtain the right policies and endorsements to protect you against water damage exposures:
Homeowners insurance by default, protect insured’s against water damage caused by broken water pipes in the home. It also covers you from damage due to rain water entering your home from losing a section of roofing, a window breaking, or a wall collapsing due to a windstorm.
Water & Sewer Backup
Available via endorsement on a homeowners policy, Water and Sewer Backup coverage protects insured’s against losses caused by the backing up of sewers or drains. Most of the time, you must request this additional coverage be added to your homeowners policy. Ask your insurance broker about this optional coverage endorsement.
Homeowners insurance does not cover you for losses caused by tidal/surface flood waters. For these types of perils, you must obtain a separate flood insurance policy. Flood insurance is written through the Federal Emergency Management Agency (or FEMA). Some states require you to apply for this type of policy directly through FEMA. Other states (such as New York) allow you to obtain this coverage through your insurance broker. Bear in mind, the maximum limit a flood insurance policy offers on residential dwellings is $250,000 as determined by FEMA.
*Note* Just because your home is not officially in a flood zone doesn’t mean your home is not at risk of flooding due to tidal/surface waters.
High Value Homes Have Specialized Options
For homes that are valued at $1 million or more in replacement cost, these high value homeowners insurance policies get written by specialty carriers such as Chartis, Chubb, and Fireman’s Fund. In most cases, these high risk policies will include basic flood and water & sewer backup coverage by default, with the option to endorse excess flood insurance directly onto the homeowners policy due to the higher replacement cost value of the home. Talk to your high value homeowners insurance broker for more information about these programs.