What Does a Homeowner's Policy Cover during Flood and Water Damage?

Water damage is tricky on a homeowners policy, because the answer is, "It depends." It depends on where the water comes from, and what it damages. It also depends on your company and your policy.

First, let's cover some of the types of water damage that are typically covered. Keep in mind that policies vary from company to company, and from state to state, so you should consult with your local agent to determine exactly what coverage you have and what adjustments you might need to make. These are some general cases about homeowners policies, but only your agent can tell you if they apply to your own homeowners policy.

Storm Damage. Typically, if a storm damages your house, the house itself is covered, and so are your possessions inside the home. For your possessions to be covered, however, most policies require that the possessions be inside the house, that the house itself be damaged, and that the damage to your possessions be a result of the damage to the house. In other words, if the storm breaks a window and the rain blows inside onto your computer, your computer would typically be covered. But if you leave the window open and it rains on the computer, you might not be covered.

• There is one more very important thing to note regarding storm damage. There are special cases where a storm includes both rain and flood in the same storm. Rain is usually covered, but flood is not (see "Flood" below.) This is most visible in the case of a hurricane, where the storm blows ocean water onto the land ("storm surge"), but it can occur in any storm when heavy rains cause the rivers and creeks to overflow. Talk to your agent about "concurrent causation."

Burst Pipes, Fixtures, or Appliances, or Accidental Overflow. This might mean a pipe in the basement freezing during the winter, or the toilet overflowing, or the water heater bursting. Most homeowners policies cover water damage resulting from burst pipes, fixtures, or appliances, or accidental overflow. (Be sure to check with your agent, however, because a few of the more limited policies do not include this coverage.) There are a couple of exceptions to note:

• If the damage was caused by an appliance that breaks, such as a water heater or dishwasher, your policy might not cover the appliance itself--that should be covered by its own warranty. But most homeowners policies will pay for damage to the home or to your possessions caused by the failed appliance.
• If your home will be vacant, unoccupied, or under construction, you might have some additional limitations on your coverage. Take reasonable precautions against freezing by maintaining heat in the home, and shutting off the water supply and draining the water from the pipes and appliances. Also be sure to talk to your agent.

Next, there are some important cases where your homeowners policy might not cover water damage. You should discuss these carefully with your agent to see if they apply to your homeowners policy.

Flood. Homeowners policies do not cover floods. A flood is when normally dry land is temporarily covered by water, whether that water comes from storms and/or surface runoff, overflow of a lake or river, overflow of tidal waters onto the land, or mudflow. The Federal Emergency Management Agency (FEMA) administers the National Flood Insurance Program, which is responsible for mapping out the areas most prone to floods and providing a flood insurance program for homeowners. Talk to your insurance agent who handles your homeowners policy. In most cases, he or she can tell you the level of risk for your home based on the flood hazard maps, and can provide you with a flood insurance policy if you decide to protect yourself. (Remember that 30% of the flood claims filed each year are in moderate- to low-risk areas, areas where residents don't expect to have a flood.)

Water Backup. Most homeowners policies do not cover water that comes up from below the surface of the ground. If you have a basement, you have some maintenance to do to keep everything intact and sound.

• Maintain the walls to keep intact and stable, watch for and repair and cracks or bowing, and keep them sealed to prevent seepage.
• Ensure that you have good drainage around the house to prevent water from building up next to the basement walls. Keep the gutter downspouts draining out several feet away from the walls, and grade the ground so that surface water drains away from the house into the sewer or drainage ditch.
• If you have a sump pump, sump pump well, or other system designed for the removal of subsurface water, keep it maintained and tested. Some companies offer optional coverage for sump pump backup or failure. Ask your agent if this is an option for your policy. Especially if your basement if finished, you could suffer a major loss if your sump pump fails and you don't have sufficient coverage.

Seepage. This means continuous or repeated seepage of water, steam, or fuel over a long period of time, such as water leaking around the shower that damages the flood underneath the shower over the course of several months. Most homeowners policies cover only "sudden and accidental" losses. If the pipes leading to the shower burst suddenly and the water damages the flood, the water damage would be covered. But if the faucet leaks a little bit each time you use the shower, and you ignore it so that the damage occurs over several months or years, this would be considered a failure to maintain it properly, and many homeowners policies would not cover it.

One more thing to keep in mind is that building codes change over time, and you might have to repair the damage differently to comply with updated building codes. Most homeowners policies, however, only reimburse you for what was damaged, not for the upgrade. If your thirty-year roof is damaged in a hailstorm, for example, but new codes require you to replace it with a forty-year roof, you might have to pay the difference unless you have Building codes cover.

Finally, keep in mind that it is your responsibility to take reasonable steps to prevent further damage after a loss has occurred. If your home has been damaged by a storm and water is coming in, cover the damaged area with a tarp, and move your possessions away from the area. If a pipe has burst, shut off the water in the pipe until it is repaired.

Homeowners policies have many different options, and they can be bewildering. Typically we find people fall into one of two groups. One group has their agent explain the policy and the limitations, so that they have the opportunity to close gaps like the one above--or to decide that certain things aren't worth the extra cost. The other group doesn't want to deal with it, so they prefer to wait until they have a claim and then find out whether it is covered.

Which group are you in? If you're in the first group, bring up these questions with your agent at your next Annual Protection Review. We have some general information about homeowners policies posted on our web site, but every company's homeowners policy is slightly different, and the coverages also vary by the state where you live, so please go over your policy with your agent.

Your home is one of your biggest assets, so you need to protect it properly. More importantly, it's your dream. If your policy can't be adjusted to get the coverage you need, consider shopping for a different company. And if your agent can't answer your questions, consider shopping for a different agent. This type of consultation is the agent's job. It's why you pay him! Don't you deserve to have your home protected?