When you return home from your vacation, you discover a small pond has formed in your basement. Something has leaked, overflowed, or exploded in the house. What was your initial reaction? Panic. Your second question is, “How do I get insurance to cover water damage?” Take a deep breath and avoid panic. The steps that follow are intended to assist.
How to Obtain Water Damage Insurance
- Determine the source of the water and take (reasonable) steps to prevent it from flowing.
- Check to see if your home insurance policy covers water damage.
- Report the claim to your insurance company.
- Hire a professional water damage cleanup company if necessary.
- Determine whether or not you need to leave the house.
- Take pictures of the damaged area as well as any damaged possessions.
- Consult with your adjuster.
- Understand the difference between ACV and replacement cost in your loss settlement.
- Meet with a number of contractors.
- Negotiate the repair settlement.
- Be prepared to have your contract canceled or not renewed.
Step 1: Locate the source of the water and take the necessary steps to stop it from flowing.
If you are confident that it is safe to proceed, take immediate action to prevent more water from flowing where it should not. This could imply turning off your home’s main valve (which often necessitates the use of a wrench) or an individual water supply valve, also known as a “stop.” To stop the flow of water, turn off the stops leading to your dishwasher, toilet, washing machine, or icemaker (clockwise). Here’s more information on how to turn off water supply valves.
By the way, before a disaster strikes, it’s a good idea to look into water leak detection systems and automatic shutoff valves. With a small investment, you could avoid a major claim and possibly save money through a home insurance discount.
Step 2: Determine whether or not your water damage is covered by your homeowner’s insurance policy.
Water damage accounted for nearly one-fourth of all home insurance claims in 2018. In the United States, the number of water damage claims actually outpaced the number of losses caused by fires and hurricanes from 2014 to 2016. What do these figures mean? Water damage is a fairly common occurrence. However, not all types of water damage are covered by a standard homeowner’s policy.
Water damage is generally covered by home insurance if it is sudden or accidental. To put it another way, you couldn’t have predicted it. Water damage is NOT covered when the cause is a lack of home maintenance/neglect (for example, a roof that hasn’t been repaired in 30 years). Flood water damage is not covered either (unless you have a separate policy for flood insurance in New York).
Water damage is typically covered by homeowners insurance.
- Unexpected plumbing or appliance problems
- Pipes that have frozen and burst
- Ice dams caused by leaking roofs
- Vandalism (recall the Wet Bandits from Home Alone?
Water damage is not typically covered by homeowners insurance.
- Groundwater basement flooding
- Floodwater or fast-thawing water entering the basement (unless you have flood insurance)
- Backup of a sewer or water pipe (unless you have a sewer backup endorsement, which is simple to add to any homeowner’s policy)
- Leaks from corroded, old pipes
- Leaks from an old, neglected roof
- Long-term leaky faucets or unrepaired toilets cause damage.
- Mold, rot, or fungus are all examples of microbial growth (unless it resulted from a covered cause)
Step 3: Contact your insurance company and file a claim.
Time is of the essence when it comes to water damage. Mold and mildew can begin to grow 24-48 hours after exposure, according to FEMA. So, if your pipe bursts on Friday night, don’t wait until Monday morning to notify your agent/insurance company. Most carriers have 24-hour hotlines to help you navigate the claims process and advise you on cleanup.
Unless you are capable of completely cleaning and drying the area on your own, it is prudent to contact a water damage/restoration company. Insurance companies may be unwilling to recommend a specific water damage company, but they should be able to assist you in identifying several local options from which to choose.
NOTE: If your dedicated insurance agent is not available to speak with you at the time of the claim, follow up during business hours. Why? There is a significant distinction between insurance agents and insurance companies. Ideally, both of them should be aware of what is going on at your house. In the event of a claim, it is your agent’s responsibility to act as your advocate and ensure that you receive a timely, satisfactory response from the carrier. Agents can also be useful in negotiating a settlement for any damages (see Step 6), which is why we recommend working with an independent agent rather than a direct writer or “captive” agent.
Step 4: Hire a professional to clean up the water and moisture.
Before moisture or mildew spreads, a water damage/restoration company (WD/RC) is frequently called in to pump out any standing water and thoroughly dry any surfaces. If mold is already present, after sealing and ventilating the wet area, the WD/RC may need to use special cleaning solutions.
Water damage restoration companies are not all the same. Unfortunately, some people may try to take advantage of an emergency situation in which you require immediate assistance. Before signing any contracts or work orders, obtain an estimate as well as written proof that the company is licensed/insured. Check out the company’s online reviews. Request references from customers in your town or neighborhood.
Remember that the WD/RC you select does not have to be the same company you use to repair walls, flooring, woodwork, ceilings, cabinets, and so on after the water has been removed. Many water damage restoration companies provide contracting services in addition to water and mold removal, but this does not mean they are the best choice for your repairs. Again, before signing any contracts or agreeing to additional work, get a quote… and speak with at least one other contractor. Often, the best person to do carpentry, flooring, or drywall is a carpenter, flooring, or drywall specialist, not a WD/RC.
Step 5: Determine whether or not you need to leave the house.
Water damage can lead to unsafe or unhealthy living conditions inside the home in severe cases. Major flooding can introduce household chemicals or wastewater into the mix, which you should avoid wading through. There is a possibility of electrocution. Mold spores can contaminate the air even after any standing water has been removed.
If you suspect any of these issues are at work, consult with your agent and your WD/RC team to determine the best course of action. Most insurance policies cover hotel accommodations and even travel.
If you are forced to vacate, you will incur dining expenses. However, you’ll want to know how much (if any) coverage you have for these items, as well as how you’re supposed to front and catalog these costs (pay for them yourself before getting reimbursed). If you decide to stay and eat somewhere else, make sure to save your receipts.
Step 6: Photograph the damaged area and any damaged belongings.
Your home restoration team will most likely take photos of the damaged area, but you should take your own as well. (If you decide to part ways with this company later, you don’t want to be chasing them down for documents.) Take pictures of any objects that need to be cleaned or replaced. Objects that become wet are only a portion of the loss in the case of water damage. Objects in mold-infested drawers or closets should also be professionally cleaned. You might be able to get reimbursed for those costs.
NOTE: Most insurance policies do not cover the appliance that caused the problem in the first place in the event of water damage. If your ice maker or dishwasher leaks behind your cabinets, for example, your insurance may cover replacement drywall and cabinets but not a new fridge or dishwasher.
Step 7: Schedule a meeting with your adjuster.
The insurance company will dispatch an adjuster to your home as soon as possible. He or she will assess the damage and take photographs and measurements. In addition, the adjuster will inquire as to how and when the damage occurred. His objective is twofold. First, he’s attempting to calculate the cost of repairing the damage. Second, he’s trying to figure out who was at fault.
You might be thinking, oh no… what if it was all my fault? Don’t be concerned. Unless you caused the problem on purpose (for example, insurance fraud), your insurance policy will cover you. Accidents are covered by insurance. Even stupid mishaps. You’re still covered if you leave a candle burning overnight and your house burns down—even if it was your fault. The same holds true for water damage. If you install your own toilet (inadvertently or on purpose) and water starts pouring through your ceiling, you are still covered.
If, on the other hand, it was someone else’s fault, the insurance company is interested in finding out. Let’s say you didn’t install the toilet incorrectly; let’s say it was done by a licensed plumber who should have known better. In that case, your adjuster and insurance company may consider “subrogating,” which means suing his insurance company for the damage he caused. The same goes for a broken appliance. Your insurance company may seek compensation from the manufacturer of a faulty washer. This is good news for you because if they successfully subrogate, you may not have to pay your deductible for the claim.
Step 8: Understand the difference between ACV and replacement cost in your loss settlement.
After his evaluation, your adjuster will send you a written estimate of how much it will cost to repair your damage. He’ll most likely make a list of labor and material line items (drywall, paint, insulation mortar, tile, etc.). Depending on the size of the claim, he may also issue a check for all or part of the amount, allowing you to begin repairs. Yay!
Just be aware that the settlement figure may appear to be a little low. Unless your home insurance policy specifies “replacement cost value,” the total of your estimate is most likely based on actual cash value or ACV. ACV represents what your property is actually worth today, not what you paid for it or how much it would cost to rebuild it from the ground up. So, if you spent $20,000 on new cabinets 15 years ago, your loss settlement would reimburse you for that amount less depreciation. More on ACV versus replacement cost can be found here.
Now for the tricky part… In some cases, insurance companies will provide a “depreciation holdback.” This means that they will eventually reimburse you for the depreciation amount they deducted, but only after you show proof that you used all of the money they gave you toward relevant repairs and also paid your deductible toward the repairs. You will be required to send bank statements or canceled checks to the various vendors involved as proof of payment.
Why do insurance companies handle claims in this manner? It’s partly because they want to make sure you’re spending your money wisely. More than once, a homeowner has accepted a water damage settlement and then fled to Vegas, never returning to address the damage he claimed. Or they’ve used the entire settlement to drastically improve a portion of their home, such as replacing linoleum tile with Brazilian hardwood. The adjuster’s job includes keeping you on track toward a complete and equitable repair.
Please keep in mind that settlement checks from insurance companies are frequently made out to you and your mortgage lender. This means that before you can cash or deposit the funds, you must first send the check to the mortgage company and have it endorsed by the Loss Draft Department. This somewhat inconvenient extra step can add time and frustration to the reimbursement process, but it is intended to ensure that your lender is aware of a damaging event at your residence. When they are aware, they may request a home inspection after the repair work is completed.
Step 9: Meet with a number of contractors.
Now that the water has been removed and any mold or mildew has been removed, it is time to repair/rebuild the affected area. Meeting with multiple contractors may not be necessary for small jobs. After all, a few hundred dollars may not be worth the time you’d spend contacting, interviewing, and visiting with various professionals.
On the other hand, if you’re planning a large project, especially one with multiple subcontractors, it makes sense to find the best partner possible. Your insurance company, once again, will not tell you who to use. It is your responsibility to vet contractors, ensure they are properly licensed and insured and compare their quotes to the settlement figure provided by your adjuster. Another advantage of meeting with multiple contractors is that it may help to demonstrate that more than one professional agrees if you believe your adjuster’s estimate is too low.
Step 10: Agree on a repair settlement.
Negotiation may not be necessary for minor claims. Larger projects, on the other hand, can be difficult to get your adjuster and contractor on the same page. This is where your independent insurance agent can help. If you don’t want to haggle over what constitutes like-kind replacement materials, ask your agent to act as a go-between. He or she is more familiar with the process and is likely to know how to frame the case you’re attempting to make.
Although your insurance company will not pay for upgrades to your home (features and materials you did not have prior to the damage), you can absolutely use this opportunity to update the damaged area—whether it’s a kitchen, bathroom, or basement—and pay for it yourself. Many homeowners who have experienced water damage do not want to reinstall the same 1970s bathroom tiles or laminate countertops. If this describes your situation, be open and honest with your adjuster about your objectives and plans. Work with your contractor to calculate the cost of repairing the bathroom as it is versus creating the bathroom you desire.
Step 11: If all else fails, be prepared to be non-renewed.
This does not always occur. Many homeowners happily renew their contract with their current carrier, but… Did we mention that your insurance company may decide not to renew your policy following a major claim? We’re aware that it stinks. And it appears unfair to many people. You pay for insurance in case you require assistance. And then you get punished for doing so.
To determine which risks (and which clients) are worth taking, insurance companies use complex formulas. This allows them to remain profitable enough to assist the people they have promised to assist. They’d be out of business pretty quickly if they promised to help everyone, regardless of loss history.
SOS Restoration is available for emergencies 24 hours a day, 7 days a week at (332) 244 7555!