By Shannon Boyd, Personal Lines Manager, Altus Private Risk
With hurricane season quickly approaching, you might be starting to think about how you can protect your home during a storm. While your homeowner’s policy may cover damage from the wind, will it cover damage from water? If you live in a coastal area, flooding from rising water during a storm can cause costly damage to your home and personal possessions. Without insurance coverage, these losses may be hard to recover from. Even if you don’t live in a coastal area, it’s important to know if your homeowner’s policy will provide coverage for damage caused by water.
Not all water losses are covered in the same way—some aren’t covered at all—so it can be confusing to decipher coverage options. Most home policies don’t cover water damage from flooding, which means you would need separate coverage to mitigate that risk. But what about water damage not caused by flooding? It’s important to consider all coverage options for water loss so you’re prepared in case of an emergency.
Depending on your home’s flood zone, as defined by the Federal Emergency Management Agency (FEMA), your eligibility for flood insurance can vary. Your flood zone is determined mostly by the property’s proximity to and elevation from the water. If you’re in an area zoned as low risk, some carriers allow for flood coverage to be added to your homeowner’s policy. This covers surface or groundwater that comes into your house or seeps through the foundation of your home, but it doesn’t cover damage from a leak or a sewer or sump pump backup into your house.
Many people in low-risk areas decide against flood coverage—instead, they make sure to protect their homes from floods in other ways, like adding a sump pump to the basement. A sump pump won’t eliminate flood risk entirely, but it does help. If you have no basement, however, there is a greater possibility that the ground floor of your home would be affected by a flood, and flood coverage may be a good idea.
For high-probability flood zones, most home insurance policies do not offer flood coverage. For these properties, you will have access to the government-backed flood insurance program from FEMA. While FEMA coverage is also available to those in low-risk areas, it is very basic and excludes coverage for most personal property and building finish materials below ground level. With this coverage, if you have a finished basement, a sunken living room or a basement used for storage, a flood could result in an uncovered loss. In addition, these losses will only be covered if the water affects two or more properties or two or more acres of land.
It’s important to know that if you’re in a high-risk flood zone, FEMA requires an elevation certificate for your home. This certificate is an administrative tool that provides FEMA with elevation information for your home and is used to determine your policy premium. Without one, you will pay the highest rates available. For new construction, the builder will likely have the elevation certificate drawn up for you. However, if you are purchasing an older home and the owners don’t have the paperwork, you may have to pay an engineer to come out and measure for your certificate.
Water Backup Coverage
Another element to consider when protecting your home against potential water damage is water backup losses. Water backup is different from a flood but just as important to think about when protecting your home. Many policies exclude this coverage or cap the coverage at low amounts.
Damage caused by water and sewer line backups, clogged drains and sump pump failure can be particularly damaging if you have a finished basement or a slab foundation. If your policy excludes water backup coverage or caps the coverage at $5,000, you will likely pay for costly repairs out of pocket. Additional coverage can sometimes be purchased by endorsement (an amendment to your coverage), but it’s even better to insure with a carrier that includes coverage for these types of losses up to the policy limits.
Many people have central station fire alarms to help prevent catastrophic fire damage, but statistics show you’re 12 times more likely to have a water loss than a fire. In recent years, there has been a steady increase in large home water losses that don’t involve the weather. Issues such as frozen pipes bursting and undetected water leaks have resulted in large claims and the relocation of residents for several months while their home is repaired.
It’s important to consider the steps that you can take to prevent water damage from the start. Automatic water flow detection and shut-off devices can monitor your water usage, send alerts and shut off your water main if a leak is detected. Credits for installing an automatic shut-off valve can be added to homeowner’s policies and may save you between 3 to 8% on your premium, depending on what type of protection the device offers. These devices range in cost and installation complexity and should always be installed by a professional.
Coverage options can be hard to decipher on your own, but a broker can help you to determine what policy is right for your needs.