Information Homeowners Should Know

FLOOD DAMAGE vs. WATER DAMAGE

Understanding which losses are covered and which are not will help you take the necessary precautions to avoid uninsured water losses. 

"Will my insurance company cover my water loss" is what we are often asked?  The type of insurance policy you have and how the water entered your home will determine if your water loss is covered. The two types of insurance policies that deal with property damage resulting from water are a homeowner’s policy and a flood insurance policy. Often one policy may cover what the other policy does not cover.

HOMEOWNERS INSURANCE 

A homeowner’s insurance policy does not cover flood damage.  Insurance companies consider water damage has occurred when water has damaged your property before the water has made contact with the ground. Not all water damage is covered either. Depending on whether the water damage was caused by a covered peril, such as a storm, or if the water damage was a result of maintenance on the homeowner’s part can depend on whether the insurance company will choose to cover the loss. Where the water originated ultimately determines whether a loss may be covered or not.

Most homeowners insurance policies are classified as HO-2, which covers 16 types of damage, or HO-3, which covers any damage not specifically excluded, such as floods. Both types of policies cover accidental water or steam discharges or overflow from your plumbing, air-conditioning, and heating or automatic fire-sprinkler systems or from appliances.

The typical homeowner’s policy (HO-3, Special Form) covers all risks of direct physical loss to your property including water damage. There are exclusions and limitations to this policy though. Typically, your homeowner’s policy will pay for sudden and accidental water damage from an inside water source. This policy does not pay for losses caused by water that makes its way into your home from outside. In a HO-3 policy, Section I - Property Exclusions, it excludes “water damage” caused by:
(1)  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.
(2)  Release of water held by a dam, levee, dike or by a water or flood control device or structure.

Although flood damage isn't directly covered by your homeowners insurance the damage left behind may be. An example of this would be if your home flooded and looters stole your property after your family evacuated, then the theft is covered even though it was indirectly caused by the flood.

FLOOD INSURANCE 

A standard flood insurance policy written by the National Flood Insurance Program provides coverage up to the policy limit for damage caused by flood. The dictionary defines a "flood" as a rising and overflowing of a body of water onto normally dry land. For insurance purposes, the word "rising" in this definition is the key to distinguishing flood damage from water damage. Generally, damage caused by water that has been on the ground at some point before damaging your home is considered to be flood damage.

National Flood Insurance Program (NFIP)
If your property is located in a floodplain and your community participates in the NFIP, you can purchase flood insurance coverage. Your lender may even 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 property owners and renters through authorized property and casualty insurance agents. No other insurance will cover flood damage.

Examples of flood damage include: 

• The river banks overflow and wash into your home.
•  Soil around the property has washed away and cannot absorb the water quickly enough to prevent water from entering the basement.

Primary reasons it is necessary to exclude “flood” from a homeowners policy are:

• Flood losses are often devastating natural disasters that cause more property losses than any individual insurance company can financially withstand.
• 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. 

ADDITIONAL INFORMATION ON WATER DAMAGE

SUMP PUMP OVERFLOW

Nearly all policies exclude or restrict water damage caused by the backup of sewers or drains. Typically it is stated in Section I – Property Exclusions, 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 refers to overflows of water from sewers and backups from drains. See the article: Understand Sump Pump Overflow for more information.

CRACK IN FOUNDATION

According to homeowners (HO-3) policy, under Section I – Property Exclusions, exclude “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. In order to keep homeowners policy premiums low and affordable for everyone, coverage is not afforded to losses that can be prevented by sound building practices or as a result of normal wear and tear rather than sudden and accidental events. 

Reasons it is necessary to exclude “water below the surface” from a homeowners policy are:  

• Current construction methods require the foundation to allow water to drain away from the home. Not all older homes have followed these methods. Due to the shifting of the soil and past rushes of water, water can then find a path to follow and collect underground and alongside of the home. If water intrusion, cracks in foundations, were covered by insurance then a home owner would have no incentive to correct the issue.  This would bring an abundance of repeat claims after severe weather.
• Every homes foundation settles over time. This leaves cracks and eventually the foundations starts to slowly deteriorate. Sometimes property owners have to excavate around the foundation to place drain tiles and patch or re-seal the foundation and the basements concrete walls. If these issues were covered was covered then a home owner would have no incentive to correct the issue.

Please note that the damage to your home as a result of a water loss is covered but the repair to the actual component that failed is not covered by your insurance. 

Example: Your homeowner’s policy will pay for the necessary costs to gain access to make the repair and to repair the damage caused by the water.  The actual broken pipe that failed due to wear and tear, decay, defective materials or methods of construction will not be paid for by the insurance company. It is the homeowner’s responsibility to replace these components. 

When water damage occurs, it is important that you locate a water restoration company that is well-trained and has the equipment to completely dry your home as quickly as possible. Water damage is progressive and items that could be restored within the first 48 hours of the water damage may not be restored if emergency response is delayed. Rainbow International is a IICRC certified water damage company can address any type of water damage. See photos of our work at: https://www.facebook.com/media/set/?set=a.211518835702126.1073741830.211496272371049&type=3