Insurance for damage caused by water

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Though life-giving, water can also be a major cause of damage to structures, both man-made and natural, in many forms. An overflowing bathtub could damage the ceiling on top of which is the floor on which the bathtub is kept. A pipe could burst and flood your basement, a difficult-to-drain out location. Dishwasher leaks, sprinkler malfunction, etc. you never know what can happen. Sometimes the damages caused by water can add up.

In North America, the claims for damage caused by water are almost double those on account of theft and fire claims put together. It is, indeed, one of the most common types of home insurance claims. In Canada, it is the foremost cause of damage to property.

Protection against damage caused by water

While we take necessary precautions, and will continue to do what can be done to prevent them, many of these events do happen. Again, and again. In different places. Beyond a point they cannot be controlled. What you can control, however, is the financial hit to your bottomline as a result.

How?

By taking out a water damage insurance policy.

But will it not add to my recurring cost?

Yes, it will. However, what it will add is a predictable, fairly small amount. What it will help protect you against is a sudden, unknown, uncapped cost caused by water damage which could put a sudden end to your plans.

In fact, most home insurance policies in North America already provide for an optional addition for coverage against water damage. That being said, coverage for water-caused damage remains one of the more opaque and less understood parts of a home insurance policy. Moreover, it varies by provider.

A ‘comprehensive policy’ is the one which covers everything except what is specifically excluded and which, perhaps, causes the most confusion in the minds of the policy holder. However, many such policies also exclude water related damage. Some exclude broad-based water-related damage but then add back certain specific areas of coverage. Then there are other providers who charge for every additional water-relate cover that you might want to add.

With some insurers, like ‘to be inserted’, you may not even need to pay extra. The inclusion is automatic for most types of water-caused damage in a ‘comprehensive’ policy. Exclusions, if any, are clearly listed out.

Some of the standard inclusions that water damage coverage policies come with are replacement of belongings, additional living expenses if incurred, home repairs and emergency cleanup services.

 

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What are the standard inclusions for water damage coverage with a  home insurance policy?

Armed with the knowledge of the coverage you already have with your policy you will be better prepared. This way you will not end up duplicating coverage and be able to take out additional insurance only for your specific requirements based on your situation.

A few examples of water-damage coverage already provided by your home insurance policy are the ones caused by:

  • Rupture of the plumbing system
  • Rupture of the air conditioning system
  • Water escaping from an appliance or a water bed or aquarium of similar equipment
  • Water escaping from a public watermain
  • Rupture of the heating system

This is a sample list. There are many other inclusions.

 

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Weather related damage

We live in times witnessing an increase in extreme weather events as well as concerns over environmental degradation repeatedly raised by environmentalists. Extreme weather events can contribute significantly to damage caused by water, over and above the annual cycle of seasons and temperature changes that take a toll on equipment used for carrying and managing supplies.

The Insurance Bureau of Canada (IBC) estimates that over a billion dollars of damage could be attributed to extreme weather events. The record-breaking temperatures in Quebec and southern Ontario are estimated to have caused $95 million in damages. Frozen rain, snowmelt, frozen ground, overland flooding, sewer backups and seepage are becoming a part of daily lexicon.

As weather continues to change and extreme weather events more common, it is becoming increasingly important to understand the coverage you have for damage caused by water, and take additional cover, if required.

The good thing is that most home insurance policies have some coverage for water related damage. The better homeowners understand this coverage, the better equipped they will be to handle situations that arise.

 

Insurance terms and phrases

Every industry tends to create a language of its own. Insurance is no different. We reproduce some of the terms and phrases that commonly feature in policies, with a brief explanation, in order that you are equipped to decipher the language of the policy you have.

Before getting on to the terms, one underlying aspect all policy owners should be aware of is that under a home insurance policy, incidents resulting in water damage are recognized as such if they are sudden and accidental.

Accidental

Not done on purpose.

Seepage

The gradual, over time, passing of water through openings and fine pores, like in windows and walls.

Sewer system

A system of pipes and channels designed to carry waste and storm water away.

Sudden

An unexpected occurrence, without prior knowledge or warning, and not something that is a regular feature.

Water escape

A burst pipe could be an example of this. Water escape is an event when water, designed to flow through a system of pipes, escapes from that network in some manner that is unintended.

Watermains

An underground piping system that supplies clean, fresh, clean drinking water to your house.

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What is covered under water damage of a home insurance policy?

The standard coverage in most Canadian home insurance policies is for damage caused by the accidental and sudden escape of water from:

  • Downspouts, eavestroughs or ice dams
  • Overflow from home appliances and water containers such as a washing machine or a hot water tank
  • Swimming pools and related equipment
  • Water coming through an orifice that was created suddenly and accidentally because of an unrelated cause
  • Water or steam from plumbing, heating, or air conditioning systems
  • Water entering your home through an opening created by an insured peril, such as a tree falling on the roof that lets in rainwater

Water backup may or may not be covered. Sometimes it may be covered but exclude damage caused by an external drain. Hence, the fine print needs to be studied.

 

What other coverage would you need?

Additional cover for water related damage, over and above the standard cover your home insurance policy provides, can be obtained. Each property is unique, as is its usage. As homeowner you are best placed to determine where the fault lines might lie.

Overland water insurance

This will cover your home and contents for damage caused by the overflowing of a river or lake and even water accumulation as a result of rain as well as rapid snow melt that cannot be taken away fast enough by the sewer system. This type of cover is also known as flood insurance.

Sewer back-up coverage

This will cover you against damage caused by a backed-up sewer line that results in water getting inside your home. It will also cover sewer overflow.

 

What is not covered?

Just as important as knowing what is covered, or maybe even more, is knowing what is not covered, so that you can guard against those eventualities with greater care.

It is important to know that damage due to leaks and seepage over time is not covered by insurance. The operative terms are ‘sudden’ and ‘accidental.’ If these two terms don’t apply, neither does the cover.

While the damage to your goods and home is covered, the event that caused the damage is not. As an example, if the water pipe bursts because of normal wear and tear, the policy will not cover the replacement of that pipe. It is expected that you would carry out routine maintenance on your own so that such events are minimized.

It should also be borne in mind that cover for damage caused by rising water tables, tidal waves, storm surges, coastal flooding, tsunamis, etc. are not a part of standard cover in North America. Perhaps that is the reason the governments have financial assistance programs in place.

There are several covers that are not available under a home insurance policy and, if needed, must be purchased separately. Like damage caused by flooding on account of a rise in the water table and excessive ground water. Or, overflowing, escaping or backed-up water from septic tanks, French drains, sump pumps and weeping tiles.

It would be advisable to seek guidance from an insurance advisor.

Water related damage not typically covered in insurance policies are the following events:

  • Boats and other water-borne objects like debris
  • Freezing-caused escape of water from a home appliance or a container outside the home
  • Ice
  • Seepage
  • Storm surges, waves and spray
  • Damage due to freezing of plumbing, heating, sprinklers, air conditioning or domestic appliance in an unheated area of your home
  • Damage resulting from pipes freezing and bursting if the home is vacant or is unattended to for a period longer than 4 days during the season when heating needs to be kept switched on and water has not been drained from all pipes in the property
  • Sprinklers, air conditioning and other home appliances in an unheated section of the house, that get damaged due to freezing of plumbing, heating
  • Tidal waves and tides
  • Water damage in a home lying vacant for over 30 days

Rental and vacation properties might also not be covered for water damage.

Policies, even the ones professing to offer coverage for water damage, might also have sub-limits for different types of damage, making it important to read through, or consult an expert, and ensure that you have optimum coverage for water-related damage.

 

Cost and deductibles

Unlike the policies, if protection for damage caused by water needs to be added to a home policy, you can expect to pay anywhere between $10 to $250 a year for broad-based coverage.

Moreover, you can expect the deductibles to be in the same range as the deductible in your standard policy, which normally is between $500 and $5,000.

 

Summing up

The policy of including protection against water damage in most of its home insurance policies, up to the limits selected, saves homeowners a lot of trouble and anxiety related to coverage.

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