When it comes to water, it is crucial to know what kind of property coverages you have and what coverages you don’t!
Most property policies exclude coverage for “Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not…” (Insurance Services Office). Thus, flood coverage must be purchased separately through the National Flood Insurance Program (NFIP). Costs vary and are dependent upon the amount of coverage desired and the property’s location within specified flood zones.
What is the difference between Flood coverage and coverage for Water Damage?
FEMA defines a flood as a “general and temporary condition of partial or complete inundation of two or more acres and two or more properties of normally dry land.” In addition, flood damage can only be caused by the “overflow of inland or tidal waters, unusual and rapid accumulation or runoff of surface waters from any source, mudflow, or collapse of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels.” In other words, a Flood may occur when water from natural sources such as rivers and lakes breach their banks during heavy rains or when the ground is over-saturated with water and causes the excess to seep through foundations or other vulnerable parts of the structure.
Water Damage must be “sudden and accidental” to be covered, such as a pipe bursting or the accidental overflow of a bathtub. In colder seasons, if freezing causes a pipe to burst, one must certify that they have done their best to maintain heat in the building or have fully drained the system and shut off the water supply in order for coverage to be available for the ensuing water damage. Rain that damages the interior of a property after roof is compromised from a storm also falls under the category of Water Damage. It should be noted that Water Damage coverage is only available under the Special Form policy format. So many things to be mindful of when protecting your property from water!
What is the actual definition of Sewer Back-Up?
Lastly, let’s clarify the difference between Flood and Water Damage from Sewer Back-Up. Sewer Back-Up is another common exclusion in property policies and is defined as “water that backs up or overflows from a sewer, drain or sump.” (ISO) Drains and sewers can back up during storms. So, what you or I call a “flooded basement” may or may not technically be “flooded” when it comes to insurance – it all depends upon how the water enters the dwelling. That stated, investors will want to make sure any drainage systems in basements are well-maintained and the sump pumps are regularly tested to help avoid water damage from Sewer Back-Up.
All three are coverages, not all three are policies. Only Flood gets its own policy.
While Flood is a type of “stand-alone” policy, Water and Sewer Back-Up are types of “perils.” Water Damage coverage can be added to a Property policy if a property is eligible for the Special Form coverage format (some insurers restrict coverage based on underwriting results or if the property is vacant). Sewer Back-Up coverage may be added depending upon the insurer, but the coverage amount is often limited to a smaller amount, $10,000 for example. Flood is always written as a separate policy, so it is important to purchase that type of policy if you want coverage for a flood.
As always, if you are unclear about your coverages, consult your agent. Many losses can be avoided by being aware of common risks as well as taking prudent steps to maintain and protect your property. Your agent will also be happy to share tips to safeguard your investment!
***Notice some unusual punctuation or capitalization in this insurance article? These anomalies are not typos, but deliberate. When covering insurance-related topics, we capitalize intentionally to indicate types of coverage, exclusions, or policy formats. For example, Water Damage, when capitalized, refers to the coverage in your policy for water damage. Without the capital letters, you are simply discussing damage done by water, which may or may not be covered.***