Insurance companies spend a lot of money paying out claims related to water damage. In fact, over the past nine years water damage claims have risen to make up over 40% of all home insurance claims. While the insurance industry does not have a comparable statistic for business property insurance claims, it is reasonable to believe those numbers are similar.
Loss due to water damage can come from many sources. External exposures to water damage include water main breaks, ground water and sewer or septic backups, rising water tables, rain or snow penetration, and backup or overflow of rainwater gutters, eaves-troughs, or downspouts. Internal exposures include ruptured or leaking plumbing, overflowing sanitary installations, and ruptured or leaking fire-suppression systems.
Of note and concern for insurance buyers - according to a report by the Canadian Institute of Actuaries - that insurance companies are learning that there has been an industry-wide under-pricing of water damage risks. This threatens insurance company profitability and capital and has the potential to lead to property insurance availability challenges for both personal and commercial property insurance.
It is clear to us as an insurance broker that insurance companies are taking reactive steps to address this challenge. Most insurers are making changes to how they handle water damage related claims and policies. These changes include:
- Higher policy deductibles specific to water damage
- Limitations or even withdrawal of coverage for some water damage perils
- Geographic risk assessments to select against some severe weather prone areas
- Municipal risk assessments to select against properties where infrastructure is aged or deemed inadequate
- Specific risk assessment to select against certain properties without certain control measures
- And, of course, high premiums to reflect the rising number of claims
For commercial and residential property owners and tenants, there are some steps you can take to lessen your exposure to water damage. Some of these measures may in fact qualify for a premium discount on your policy.
- Ensure your property has a professionally installed backwater valve or sump pump
- Have a professional examine your foundation for cracks and repair any cracks discovered
- Check to be sure that your roof is within the lifetime of its materials, usually fifteen to twenty years for most shingles
- Ensure your water heater is within the manufacturer's specified age for replacement
- Ensure hoses on washing machines, dishwashers, etc. are within their guaranteed lifetime and in good repair
- Have a professional perform a visual inspection for your septic line or sanitary sewer line, between your building and municipal system, to determine if the recommended slope is acceptable and that there is no blockage of the line - cracks, root penetrations, etc. A licensed plumber or a commercial contractor can complete such an inspection using a CCTV system.
We are available as a resource to help you understand the changes insurance providers have made surrounding water damage claims. If you have questions about your current protection or want to know how you can manage your property's risk, please don't hesitate to contact us.