How to Get Insurance to Pay for Water Damage
You come home from vacation to find a small pond has materialized in your basement. Something in the house has leaked, overflowed, or exploded. Your first reaction? Panic. Your second: How to get insurance to pay for water damage? Take a breath and skip the panic. The following steps are designed to help.
How to Get Insurance to Pay for Water Damage
- Determine the source of the water; take (reasonable) measures to stop it from flowing.
- Determine if your water damage is covered by your home insurance policy.
- Call your insurance agent and report the claim.
- If needed, hire a professional water damage clean-up company.
- Determine if you need to leave the home.
- Take photos of the damaged area and any damaged possessions.
- Meet with your adjuster.
- Understand your loss settlement: ACV vs. replacement cost.
- Meet with several contractors.
- Negotiate the settlement for repairs.
- Be prepared to get canceled or non-renewed.
Step 1: Determine the source of the water; take steps to stop it from flowing.
If you are certain it is safe to do so, take immediate action to stop more water from flowing where it shouldn’t. This might mean shutting off your home’s main valve (which often requires a wrench) or else an individual water supply valve, also known as a “stop.” Stops leading to your dishwasher, toilet, washing machine, or icemaker can typically be turned off (clockwise) by hand, to suspend the flow of water. Here’s more on how to shut off water supply valves.
By the way, it’s a good idea to research water leak detection systems and automatic shutoff valves before disaster strikes. With one small investment, you could prevent a serious claim and potentially save money via a home insurance discount.
Step 2: Determine if your water damage is covered by your home insurance policy.
In 2018, nearly one in four home insurance claims was the result of water damage. From 2014-2016, the number of water damage claims in the U.S. actually outpaced the number of losses caused by fires and hurricanes. What do these numbers mean? Water damage is pretty common. But not every kind of water damage is covered by a typical homeowner’s policy.
As a general rule, water damage is covered by home insurance if it is sudden or accidental. In other words, you couldn’t have predicted it was going to happen. Water damage is NOT covered when it’s the result of a lack of home maintenance/neglect (e.g. a roof you haven’t repaired in 30 years). Flood water damage is also NOT covered (unless you have a separate policy for flood insurance in Massachusetts).
Water Damage Usually Covered by Home Insurance:
- Sudden, accidental plumbing or appliance issues
- Frozen, burst pipes
- Leaking roof
- Ice dams
- Vandalism (remember the Wet Bandits in Home Alone?)
Water Damage Not Typically Covered:
While homeowners insurance covers many water damage scenarios, there are certain situations where your policy may not provide coverage. Familiarizing yourself with these common exclusions can help you better manage and maintain your property to avoid costly repairs. Here are some examples of water damage that typically aren’t covered by insurance:
- Negligence: If a lack of proper maintenance or negligence on your part causes water damage, your insurance company may not cover the damages. For example, if you fail to repair a leaky roof — resulting in damage to your home’s interior — this may be considered negligence, and the cost of repairs will be your responsibility.
- Gradual damage: Insurance policies usually don’t cover damage that occurs gradually over time. This includes damage from slow leaks, deteriorating plumbing, or seepage through your home’s foundation. These issues are considered the result of normal wear and tear, and the cost of repairs falls on the homeowner.
- Flood damage: While water damage caused by burst pipes or heavy rain may be covered, damage from flooding due to natural disasters is typically excluded from standard homeowners’ policies. Flooding in Massachusetts can occur from heavy rainstorms, hurricanes, and rapid snowmelt. To protect your property from flood damage, you’ll need to purchase a separate flood insurance policy through the National Flood Insurance Program (NFIP) or a private insurer.
- Sewage backup: Another common exclusion is damage caused by sewage or septic system backup. These events can lead to significant property damage and pose health risks. You may need to add an endorsement to your policy or purchase separate coverage to protect your home from this type of damage.
- Earth movement: In some areas of Massachusetts, particularly in the western part of the state, damage from water seepage or infiltration due to earth movement, such as landslides or soil erosion, may not be covered by your policy. You should review your policy to understand the extent of your coverage for these events.
To ensure you have adequate coverage for your specific needs, review your insurance policy and discuss any concerns with your independent insurance agent. By understanding your policy’s limitations, you can take proactive steps to maintain your property and minimize your risk of encountering costly, uncovered water damage situations.
Step 3: Call your insurance agent and report the claim.
When it comes to water damage, time is of the essence. According to FEMA, mold and mildew can begin to develop 24-48 hours after exposure. So, if your pipe bursts on Friday night, don’t wait until Monday morning to let your agent/insurance company know what is happening. Most carriers maintain 24/7 hotlines to guide you through the claims process and advise you on cleanup.
Unless you’re able to completely clean and dry the area on your own, it makes sense to at least contact a water damage/restoration company. Insurance companies may be unwilling to recommend a specific water damage company, but they should be able to help you identify several local options to choose from.
NOTE: If your dedicated insurance agent is not available to speak with you at the time the claim arises, make sure you follow up during business hours. Why? There’s a big difference between insurance agents and insurance companies. Ideally, both of them should know what is happening at your house. In the event of a claim, it’s your agent’s job to act as your advocate, and help make sure you’re getting a timely, satisfactory response from the carrier. Agents can also be valuable in helping to negotiate a settlement for any damages (see Step 6)—one reason we recommend working with an independent agent, rather than a direct writer or “captive” agent.
Step 4: Get the water and moisture professionally cleaned up.
A water damage/restoration company (WD/RC) is often required to pump out any standing water and thoroughly dry any surfaces before moisture or mildew spreads. If mold is already present, the WD/RC may need to apply special cleaning solutions, after sealing and ventilating the wet area.
Water damage and restoration companies are not all created equal. Some, unfortunately, may try to take advantage of an emergency situation, where you need help quickly. Before signing any contracts or work orders, make sure you get an estimate and written proof the company is licensed/insured. Read the company’s online reviews. Ask for references from clients in your town or neighborhood.
Keep in mind, the WD/RC you choose does not have to be the same company you use to repair walls, flooring, woodwork, ceilings, cabinets, etc. after the water is gone. Many water damage companies do offer contracting services, in addition to water and mold remediation, but that doesn’t mean they are the best choice for your repairs. Again, don’t sign any contracts or agree to additional work without getting a quote… and speaking with at least one other contractor. Often, the best person to do carpentry, flooring, or drywall is a person who specializes in carpentry, flooring, or drywall—not a WD/RC.
Step 5: Determine if you need to leave the home.
In serious cases, water damage can lead to unsafe or unhealthy living conditions inside the home. Major flooding can draw household chemicals or waste water into the mix—not something you should be wading through. The risk of electrocution may be present. And even after any standing water is gone, mold spores can contaminate the air.
If you suspect any of these issues are at play, ask your agent and your WD/RC team to advise you on the safest course of action. Most insurance policies include coverage for hotel accommodations and even dining expenses if you are forced to vacate. But you’ll want to understand how much (if any) coverage you have for these items, as well as how you’re expected to front and catalogue these expenses (pay for them yourself before getting reimbursed). If you do stay and eat elsewhere, be prepared to save receipts.
Step 6: Take photos of the damaged area and any damaged possessions.
Your home restoration team will likely take photographs of the damaged area, but you should take your own. (If you later decide to cut ties with this company, you don’t want to be chasing them around for documents.) You should also take photos of any objects that need to be cleaned or replaced. With water damage, objects that get wet are only part of the loss. Objects in drawers or closets where mold has spread should also be professionally cleaned. You may be entitled to reimbursement for those expenses.
NOTE: In the event of water damage, most insurance policies do not cover the appliance that caused the problem in the first place. So, for example, if your icemaker or dishwasher leaks behind your cabinets, your insurance may cover replacement drywall and cabinets, but not a new fridge or dishwasher.
Step 7: Meet with your adjuster.
As soon as possible, the insurance company will send an adjuster to your home. He or she will evaluate the damage, take photos and measurements. The adjuster will also ask questions about how and when the damage occurred. His goal is twofold. First, he’s trying to estimate how much it will cost to repair the damage. Second, he’s looking to determine if anyone was at fault.
You may be thinking, uh oh… what if it was my fault? Don’t worry. Unless you intentionally created the problem (e.g. insurance fraud), your insurance policy is there for you. Insurance is intended for accidents. Even dumb accidents. If you leave a candle burning overnight and your house burns down, you’re still covered—even though yes, it was your fault. Same principle applies with water damage. If you install your own toilet (improperly, by accident), and water starts raining through your ceiling, you are still covered.
However, if it was someone else’s fault, the insurance company has an interest in finding out. Say, for example, you didn’t improperly install that toilet; say it was a licensed plumber, who should have known better. In that case, your adjuster and insurance company may look to “subrogate,” which means going after his insurance company for the damage he caused. Ditto for a faulty appliance. Your insurance company may try to collect damages from the maker of a malfunctioning washer. This is good news for you because if they’re able to successfully subrogate, you may be off the hook for paying your deductible toward the claim.
Step 8: Understand your loss settlement: ACV vs. replacement cost.
At some point after his evaluation, your adjuster will send a written estimate of what he thinks it should cost to repair your damage. He will probably create a list of line items for labor and materials (drywall, paint, insulation mortar, tile, etc.). Depending on this size of the claim, he may also issue a check for all or some of this amount, so you can get started on repairs. Yay!
Just be prepared; that settlement figure may seem a little low. Unless your home insurance policy was written to provide “replacement cost value,” the total of your estimate is likely based on an actual cash value, or ACV. ACV represents what your property is actually worth today—not what you paid for it, or what it would cost to make it brand new. So, for example, if you spent $20K on new cabinets 15 years ago, your loss settlement would reimburse you for $20K minus depreciation. Here’s more on ACV versus replacement cost.
Now, here’s a tricky caveat… in some cases, insurance companies will offer what’s called a “depreciation holdback.” This means, they will give you back that depreciation amount they subtracted, eventually, but only after you show proof you have used all the money they gave you toward relevant repairs and also paid your deductible toward the repairs. For proof of payment, you will be required to send bank statements or canceled checks to the different vendors involved.
Why do insurance companies pay claims this way? In part, it’s because they’re making sure you are using the money as intended. More than once, some homeowner has taken a water damage settlement and run off to Vegas, never addressing the damage he claimed. Or else they’ve taken the entire settlement to dramatically upgrade some portion of their home—replacing linoleum tile with Brazilian hardwood. Part of the adjuster’s job is to keep you on track toward a complete and equitable repair.
Note: settlement checks from insurance companies are often made out to you and your mortgage lender. This means you need to send the check to the mortgage company, and get it endorsed by the Loss Draft department, before you can cash or deposit the funds. This somewhat-annoying extra step can add time and frustration to the reimbursement process, but it’s designed to ensure your lender knows there was a damaging event at your home. Once they know, they may require a home inspection after the repair work has been completed.
Step 9: Meet with several contractors.
Now that the water is gone and the danger of any mold or mildew has been eliminated, it’s time to repair/rebuild the affected area. For small jobs, meeting with multiple contractors may not be as important. After all, the difference between a few hundred dollars may not be worth the time you’d spend in contacting, interviewing, visiting with different professionals.
On the other hand, if you’re looking at a major project—especially one that involves multiple subcontractors—it makes sense to find the very best partner. Again, your insurance company won’t tell you who to use. It’s up to you to vet contractors, ensure they are properly licensed and insured, and compare their quotes against the settlement figure from your adjuster. Another advantage of meeting with multiple contractors is that, if you think your adjuster’s estimate is too low, it may help to show that more than one professional agrees.
Step 10: Negotiate the settlement for repairs.
For small claims, negotiation may not be an issue. But larger projects usually pose challenges, in terms of getting your adjuster and contractor aligned. Here’s where your independent insurance agent can also be a resource. If you don’t have the stomach for haggling over what constitutes like-kind replacement materials, ask your agent to play middleman. He or she has more experience with this process, and probably knows how to frame the case you’re trying to make.
Note: although you cannot expect your insurance company to pay for upgrades to your home (features and materials you didn’t have before the damage), you absolutely can use this opportunity to update the damaged area—whether it’s a kitchen, bathroom, or basement—and pay for it yourself. Many homeowners who suffer a water damage event find that they don’t want to put back the same 1970’s bathroom tiles or laminate countertops. If this matches your situation, be honest with your adjuster about your goals and plans. Work together with your contractor to calculate the difference between repairing the bathroom as it was, and creating the bathroom you actually want.
Step 11: Just in case… be prepared to get non-renewed.
This doesn’t always happen. Many homeowners happily go on to continue their relationship with their current carrier, but… Did we mention your insurance company may choose to non-renew your policy after a major claim? It stinks, we know. And for many people, it seems unfair. You pay for insurance in case you need help. And then when you do… you get punished for it.
The truth is, insurance companies leverage complex formulas to determine which risks (and which clients) are worth taking. This helps them stay profitable enough to help the people they promise to help. If they promised they could help everyone—regardless of loss history—they’d be out of business pretty quickly.
But hey, this is another reason why it’s a good idea to work with an independent insurance agent. If your home insurance is cancelled, an independent agent can help you find other options. Here at C&S, we have lots of carrier options. We’re always glad to help, too—whether the question is how to get insurance to pay for water damage, or how to find the best rate on MA home and auto insurance. Give us a call: 508.339.2951.
Should You Pursue Legal Advice?
In some situations, pursuing legal advice may be helpful, or even necessary, when dealing with water damage and insurance coverage. While your independent insurance agent can act as your advocate throughout the claims process, there are instances where having an attorney may be beneficial. Here are some scenarios where seeking legal counsel might be appropriate:
- Coverage disputes: If your insurance company denies your claim, arguing that your policy doesn’t cover the water damage, you may want to consult an attorney to review your policy and help determine if the denial is valid. An experienced attorney can help you understand the nuances of your policy and potentially fight the denial on your behalf.
- Inadequate settlement offers: If you believe the settlement your insurance company offers is insufficient to cover the cost of repairs or if they’re unwilling to negotiate, an attorney can help you build a case and negotiate a more favorable settlement. They can also provide legal guidance in disputes over actual cash value (ACV) versus replacement cost value (RCV) settlements.
- Legal liability: If a third party, such as a contractor or a neighbor, causes the water damage, you may need an attorney to help you pursue compensation from the responsible party. In these cases, an attorney can help establish liability and navigate the legal process to recover damages.
- Bad faith claims: If you suspect your insurance company is acting in bad faith — such as delaying payment, not conducting a proper investigation, or misrepresenting your policy terms — an attorney can help you hold the company accountable and seek damages for their actions.
Before hiring an attorney, it’s essential to weigh the potential benefits against the costs. Legal fees can be expensive, and pursuing legal action may not always result in a favorable outcome.
In many cases, working with your insurance agent and staying proactive in the claims process can help you resolve issues without requiring legal intervention. However, if you feel that your rights are being infringed upon or that you’re not receiving fair treatment from your insurance company, seeking legal advice could be a valuable step in protecting your interests.