Water damage is almost always excluded from personal and commercial policies. While water damage caused by flood or other outside-water can be covered by a Federal Flood policy, there are endorsements that can cover water damage that originates from inside the building. These types of water damage are commonly defined in four ways.
In personal or commercial property insurance policies, water damages are almost universally excluded. However, many carriers offer endorsements to buy-back coverage for Water Back-Up, Overflow, Discharge, Sump Pumps, or some combination of the four. To figure out the proper coverage, we’ll need to define each of these:
Water Back-Up: This coverage is for when water flow is stopped, usually caused by a clog in the pipe, causing water to back-up. A collapsed or bent pipe can stop water flow as well. This coverage would pay for any damages caused by the water that is forced back out of the pipe.
Water Overflow: This coverage is for when water accumulation exceeds its container—often a bathtub or sink. This scenario would be aided by a partial clog. Again, all damages caused by the overflowing water would be covered.
Water Discharge: This coverage is for when a pipe is leaking. This might be caused by eroded pipes that have holes in them, old pipes with cracks in them, or leaks in the joints. This would cover all damages by the discharged water.
Sump Pumps: For buildings that have sump pumps, special coverage can be endorsed. The water damages caused by a malfunctioning or broken sump pump may include the three previously mentioned types, along with other special items.
Other than for sump pump coverage, notice that the coverage is only paying for consequential damages. The cost to repair the pipes, unclog the pipes, etc. is not covered. However, when it comes to water claims, the consequential losses are going to outweigh what you’ll spend on a plumber.
Water damage can be costly, and even more so if you didn’t know that water damages aren’t covered in your basic policy! Usually endorsements can be added to cover these water loss exposures and for sump pumps. The additional premium is usually pretty small, and it could possibly save you thousands of dollars later on!