Every year, water damage from plumbing leaks ranks among the most frequent and insidious causes of homeowners insurance claims. While most of us are familiar with the hazards of frozen pipes, millions of water damage incidents occur year-round, in all climates, due to factors such as water pressure changes, pipe corrosion, HVAC issues, appliance age, and appliance malfunctions. Cumulatively, water damage and freezing cause nearly one-quarter of reported homeowners claims in the U.S.
As if dealing with the aftermath of a leak isn’t difficult enough, affluent homeowners are frequently astounded by the additional complications that upend their lifestyle and make insurance harder to access in the future. Unlike a straightforward transaction, water damage claims involve much more than monetary reimbursement.
If we continue the above scenario, extensive damage will keep the family displaced from the home for at least three months, and often much longer, according to high-net-worth insurance carrier estimates. Whether they take up residence in a nearby hotel or rental property, they’ll likely be farther from school and disconnected from everyday routines. They’ll recover costs for contents, but there’s no replacing destroyed sentimental items.
Our role as risk advisors is to help clients safeguard the successful lives they’ve built. When it comes to water damage, that means educating them about their coverage options, and motivating more people to take proactive mitigation and risk management steps.
Know Your Limits - Literally and Figuratively
Not all policies are the same. Key water damage related coverages you should look for on your homeowners policy:
- Structural repairs or rebuilding to match the prior quality
- Replacement of fixtures and furnishings to match the prior quality
- Additional living expenses if the home is uninhabitable
Other factors to consider:
Mold
If mold accumulates, however, most policies have sub-limits that cap the extent of reimbursement you can receive. Once those limits are reached, you can become personally responsible for remediation costs.
Condos
If the leak occurred in a condo rather than a single-family home, you may be liable for the impact on neighboring units.
Specialty materials and unique architectural designs
High-net-worth carriers take great care to uphold the architectural and design integrity of their clients’ homes in a claim situation. That is a tremendous advantage but may significantly increase your renovation timeline.
For example, if a damaged section of custom, imported flooring can’t be matched identically, the entire floor may need replacing. That alone could take months.
Prepare for changes in insurability and take action now
Unfortunately, the impact of a water damage claim will linger long after repairs are completed. Many carriers restrict coverage availability for homes with a previous water damage loss, as there is a heightened risk of repeat occurrences.
To offset this likelihood, more high-net-worth carriers are requiring the installation of automated leak detection and water shutoff devices as a condition of offering or continuing coverage — and will provide some degree of reimbursement toward device installation. We’ve also begun seeing this requirement extend to homes over a certain property value threshold, regardless of claim history.
Don’t wait until after you’ve endured a water damage claim to get smart about water damage prevention. Aside from the obvious benefit of avoiding months of frustration and discomfort, proactively addressing known perils like water damage can make you a more attractive prospect for coverage today and tomorrow — an undeniable advantage in the increasingly challenging personal insurance marketplace.
Make the Mitigation Investment
With the advent of smart home technology, homeowners can thwart common causes of property damage before they get out of hand. Reaping the benefits, however, requires up-front expense and effort.
If you’re grappling with cost or the complexity of identifying the right mitigation solutions for your primary and seasonal properties, reframe it as an investment in future value and enjoyment.
Dozens of water shutoff and leak detection products are on the market today. The risk advisors and loss control specialists at Risk Strategies stay abreast of which systems and products are the most effective and qualify for premium credits. While expensive — automated, whole-house water monitoring and shutoff systems can exceed several thousand dollars — however these one-time fees to purchase and install can be offset by annual premium savings over a few years.
Insurance helps us recover from events beyond our control, yet the catastrophic water damage in our earlier scenario was not a forgone conclusion. It likely started slowly and subtly — a hairline crack in an aging pipe. When more homeowners take responsibility for risk management, they better their circumstances and fortify an overburdened industry. That’s a ripple effect we can all embrace.
Explore Your Options
Whenever possible, choose an automated whole-house water monitoring and shutoff system that sends alerts through an app and/or connects with your central station alarm system. There are two main types:
Flow-based systems
Flow-based systems offer the most comprehensive protection and are preferred by high-net-worth insurance carriers. They monitor overall water usage and can shut off the water supply in the event of a leak or unusual activity. They often use machine learning to determine normal vs. abnormal water consumption for your household.
Sensor-based systems
Sensor-based systems are effective, but require you to place physical sensors near all water-consuming appliances and fixtures. If water reaches a sensor, a wireless signal triggers the water supply to shut off. These systems may not detect leaks that don’t reach a sensor.
Learn more about preventing water damage in your homes, check out our Preventing Leak Damage Resource Guide.
