How to get insurance to pay for water damage?

When you return home from vacation, you discover a tiny pond has formed in your basement. Something has leaked, overflowed, or burst in the house. What was your initial reaction? Panic. Your second question is, "How can I get insurance to cover water damage?" Take a deep breath and avoid panic. The actions that follow are meant to assist you.

How to Get Water Damage Insurance to Cover the Costs

1. Determine where the water comes from and take (reasonable) steps to stop it from flowing.
2. Check your homeowner's insurance policy to see if your water damage is covered.
3. Report the claim to your insurance agent (or have a lawyer do it for you).
4. Hire a professional water damage restoration firm if necessary.
5. Determine whether or not you need to leave the house.
6. Take pictures of the damaged area as well as any damaged items.
7. Make an appointment with your insurance adjuster (or have a lawyer do it for you).
8. Understand the difference between ACV and replacement cost in your loss compensation.
9. Consult with several contractors (or an experienced home insurance attorney).
10. Have an attorney negotiate the claim settlement.
11. Prepare to have your home insurance contract canceled or not renewed.

Step 1: Determine where the water is coming from and take steps to stop it from flowing.

Take immediate action to stop more water from flowing where it shouldn't if you're sure it's safe to do so. This could entail turning off your home's main valve (which usually takes a wrench) or a single water supply valve, often known as a "stop." To stop the water flow, turn off (clockwise) the stops leading to your dishwasher, toilet, washing machine, or icemaker by hand. More information on how to turn off water supply valves can be found here.

Before calamity hits, it's a good idea to look into water leak detection systems and automated shutoff valves. With a bit of investment, you might avoid a significant claim and possibly save money on your house insurance.

Step 2: Check your homeowner's insurance policy to see if your water damage is covered.

Water damage accounted for approximately one-fourth of all house insurance claims in 2018. Between 2014 and 2016, the number of water damage claims in the United States outpaced fire and hurricane-related losses. What do these figures imply? Water damage is a somewhat regular occurrence. A conventional homeowner's policy, however, does not cover all types of water damage.

Water damage is usually covered by homeowners insurance if it occurs suddenly or accidentally. To put it another way, you couldn't have guessed it would happen. Water damage caused by a lack of house upkeep or neglect (for example, a roof that hasn't been repaired in 30 years) is not covered. Flood water damage isn't covered either (unless you have a separate policy for flood insurance in Massachusetts).

Homeowners' Insurance Usually Covers Water Damage

Unexpected plumbing or appliance problems

Pipes that have frozen and exploded

Ice dams caused by leaking roofs

(Remember the Wet Bandits from Home Alone?) Vandalism

Home Insurance Doesn't Usually Cover Water Damage

Water from the ground seeping into your basement.

Water from a flood or a quick thaw seeping into the basement (unless you have flood insurance)

Backup of a sewer or water line (unless you have a sewer backup endorsement, which is simple to add to any homeowner's policy)

Leaks from deteriorated, ancient pipes

Roof leaks caused by an old, neglected roof

Long-term leaky faucets or unfixed toilets cause damage.

Mold, rot, or fungus are all examples of fungus (unless it resulted from a covered cause).

Step 3: Report the claim to your insurance agent.

Time is of the essence when it comes to flood damage. Mold and mildew can appear 24-48 hours after exposure, according to FEMA. So, if your pipe bursts on a Friday night, don't wait until Monday morning to notify your agent or insurance company. Most insurance companies have 24-hour hotlines to help you navigate the claims procedure and provide cleanup advice.

Unless you're confident in your ability to clean and dry the area thoroughly on your own, you should at the very least contact a water damage/restoration firm. Insurance companies may be hesitant to recommend a specific water damage firm, but they should be able to point you in the direction of a few nearby possibilities.

NOTE: If your dedicated insurance agent is unavailable at the time of the claim, be sure you contact them during office hours. Why? The distinction between insurance agents and insurance firms is significant. Both of them should, ideally, be aware of what is going on at your home. It is your agent's role to act as your advocate in the event of a claim, ensuring that you receive a prompt and adequate answer from the carrier. We advocate working with an independent agent rather than a direct writer or "captive" agent because agents can assist in negotiating a settlement for any damages (see Step 6).

Step 4: Hire an expert to clean up the water and dampness.

Before moisture or mildew develops, a water damage/restoration firm (WD/RC) is frequently called to pump out any standing water and thoroughly dry any surfaces. After closing and ventilating the damp area, the WD/RC may need unique cleaning solutions if mold is already present.

Not all water damage restoration firms are made equal. Unfortunately, some people may try to take advantage of an emergency where you want immediate assistance. Ensure you acquire an estimate and written verification that the company is licensed and insured before signing any contracts or work orders. Examine the company's internet feedback—request client references from your town or neighborhood.

Remember that who you hire does not have to be the same one to repair your walls, flooring, woodwork, ceilings, cabinets, and other structural elements after the water have gone. Although many water damage firms also provide contracting services in addition to water and mold cleanup, this does not necessarily indicate they are the best option for your repairs. Again, acquire a quote and consult with at least one other contractor before signing any contracts or agreeing to work further. A person specializing in carpentry, flooring, or drywall is often the ideal to undertake carpentry, flooring, or drywall.

Step 5: Decide whether or not you need to leave the house.

Water damage can lead to unsafe or harmful living conditions within the home in severe circumstances. Flooding might bring household chemicals or wastewater into the mix, which you don't want to wade through. There's a chance you'll get electrocuted. Mold spores can contaminate the air even after any standing water has been removed.

If you feel any of these problems are at hand, get advice from your agency and your WD/RC team on the best course of action. Most insurance policies cover hotel expenditures and meal expenses if you are forced to leave your home. However, you should know how much (if any) coverage you have for these charges, as well as how you're supposed to front and document them (pay for them yourself before getting reimbursed). If you decide to stay and eat somewhere else, make sure to keep your receipts.

Step 6: Photograph the damaged area as well as any damaged items.

Your house restoration crew will most likely take photos of the damaged area, but you should bring your own as well. (You don't want to be pursuing this company for documentation if you decide to part ways with them later.) You should also photograph any items that require cleaning or replacement. Wet objects are only part of the problem when it comes to water damage. Moldy objects in drawers or closets should be professionally cleaned as well. 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 drywall and cabinet replacement but not a new fridge or dishwasher.

Step 7: Schedule an appointment with your adjuster (or have an attorney do it for you).

The insurance company will dispatch an adjuster to your home as soon as feasible. They will assess the damage, photograph it, and take measurements. The adjuster will also inquire about the cause and timing of the damage. 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 blame.

You might be thinking to yourself, "What if it's my fault?" Don't be concerned. Unless you created the problem on purpose (for example, insurance fraud), your insurance policy would protect you. Accidents are the reason for insurance—even unintended consequences. You're still insured if you leave a candle burning overnight, and your house burns down, even if it was your fault. Water damage follows the same approach. If you build your toilet (inadvertently, by accident), you're still insured, and water starts pouring through your ceiling.

If it was someone else's fault, though, the insurance company is interested in learning more. Let's pretend you didn't install that toilet incorrectly; let's pretend it was established by a licensed plumber who should have known better. In that instance, your adjuster and insurance company may pursue "subrogation," which includes suing his insurer for the damage he caused. The same can be said about a malfunctioning 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 be responsible for paying your deductible on the claim.

Step 8: Recognize the difference between ACV and replacement cost in your loss settlement.

Your adjuster will offer you a written estimate of how much it will cost to restore your damage after he has completed his evaluation. He'll most likely make a list of labor and material line items (drywall, paint, insulation mortar, tile, etc.). He may also issue a check for all or part of this amount, depending on the extent of the claim, so that you can get started on repairs.

Just be aware that the settlement amount may appear to be a little low. Unless your house insurance policy specifies "replacement cost value," your estimate's total is most likely based on an actual cash value or ACV. ACV is the current value of your property, not what you paid for it or what it would cost to make it brand new. If you invested $20K on new cabinets 15 years ago, your loss settlement would reimburse you for that amount minus depreciation. More on ACV vs. Replacement Cost can be found here.

Now, here's the catch, Insurance companies may offer something termed a "depreciation holdback" in some instances. This means that they will eventually give you back the depreciation amount they deducted, but only after you prove that you spent all of the money they gave you toward appropriate repairs and paid your deductible. You will be needed to send bank statements or canceled cheques to the various vendors involved as proof of payment.

Why do insurers pay claims in this manner? It's partly because they want to make sure you're spending your money wisely. A homeowner has collected a water damage payout and gone to Vegas on several occasions, never fixing the damage he claimed. Alternatively, they may have used the entire settlement to remodel a piece of their property, such as replacing linoleum tile with Brazilian hardwood. The adjuster's role includes keeping you on track for a thorough and equitable repair.

Insurance company settlement payments are frequently made out to you and your mortgage lender. This implies that before you can cash or deposit the monies, you must mail the check to the mortgage company and endorse it by the Loss Draft Department. This extra step can add time and frustration to the reimbursement process, but it's necessary to ensure your lender is aware of a dangerous occurrence at your residence. They may need a house inspection after the repairs are completed if they know.

Step 9: Consult with several contractors (or an experienced home insurance attorney).

It's time to repair/rebuild the affected area now that the water is gone and any mold or mildew is no longer a threat. Meeting with many contractors may not be necessary for modest work. After all, the time you'd spend contacting, interviewing, and visiting with several pros might not be worth the difference in a few hundred bucks.

On the other hand, if you're working on a big project—especially one with many subcontractors—it's a good idea to choose the best partner you can. Your insurance provider will not tell you who to use this time. It's up to you to evaluate contractors, ensure they're appropriately licensed and insured, and compare their prices to your adjuster's settlement amount. Another benefit of meeting with different contractors is that if you believe your adjuster's estimate is too low, you may establish that more than one specialist agrees with you.

Step 10: Work out a settlement for the repairs.

Negotiation may not be necessary for modest claims. Larger jobs, on the other hand, can be challenging to coordinate with your adjuster and contractor. Your independent insurance agent can help you with this as well. Ask your agency to act as a middleman if you don't have the stomach to haggle over what defines like-kind replacement materials. They have more excellent experience with this procedure and are more likely to know how to construct the argument you're making.

Although your insurance company will not pay for modifications to your home (features and materials you didn't have before the damage), you can take advantage of this opportunity to replace the damaged area—whether it's a kitchen, bathroom, or basement pay for it yourself. Many homeowners who have had water damage do not want to reinstall the identical 1970s bathroom tiles or laminate worktops. If this is your circumstances, tell your adjuster everything you know about your goals and ambitions. Calculate the difference between restoring the bathroom as it was and developing the bathroom you desire with your contractor.

Step 11: Be prepared to be non-renewed just in case.

This isn't always the case. Many homeowners are content to stick with their current service provider, however... Did we mention that after a significant claim, your insurance provider may decide not to renew your policy? We understand how bad it is. And many people believe it is unjust. You pay for insurance in case you require assistance. And then you're penalized as a result of it.

On the other hand, insurance firms use complicated formulae to assess which risks (and which clients) are worthwhile. This allows them to remain lucrative enough to assist the people they have promised to help. They'd be out of business in no time if they vowed to aid everyone, regardless of loss history.