How will home insurance cover water damage?

A home insurance policy will often cover water damage if the damage was sudden or accidental, such as if a pipe bursts or your home floods. But gradual water damage over time may be blamed on a lack of proper maintenance, which means your home insurance policy may not cover you.

Taking precautions and being prepared for water damage is practical. Almost every property faces the risk of water damage sooner or later. Water damage incidents account for almost a quarter (24%) of all home insurance claims, according to a 2021 survey released by Australian insurer QBE.  

Water damage can include anything from a burst tap or overflowing sewer to a leaky dishwasher or air conditioner. Leakage and seepage of water, often referred to as gradual damage, can occur in several ways and can worsen over time, potentially requiring more significant repairs. As a homeowner, it’s sensible to regularly inspect your property, as your home insurance policy may not cover repair costs if there is evidence of negligence or poor maintenance.

What water damage are you covered for?

Accidental or sudden water damage is usually covered by home insurance, which may include damage from storms or floods. Home insurance coverage can vary from company to company and policy to policy, so it’s best to check your individual product disclosure statement (PDS) for specific clarification. 

Before an insurer will pay out an insurance claim, they will typically want to check if the water damage may have been gradual, which may lead to your claim being denied. As a homeowner, you’ll need to establish, beyond doubt, that any water damage to your home arose suddenly and not gradually when making a claim. At the same time, you may not be legally permitted to repair the plumbing in your home yourself, and you may have to negotiate with your insurer before any serious repairs can be done.

What you need to know before making a claim for water damage

If you are concerned about water damage in your home, consider reading the water damage clause in your home insurance policy's PDS, ideally before purchasing the policy.

For instance, water may start dripping from an air conditioner in your home after a few years of use. If this was to happen while you were travelling or otherwise not present at home, your home’s walls and flooring may be significantly damaged by the time you return. Discovering too late that your policy doesn't cover this type of damage can be frustrating and costly.

Home insurance coverage can vary wildly, and the terminology used can help indicate what a policy may cover. In the event of water damage, a common phrase to look for is “escape of liquid”, although some insurers may refer to it by other terms, such as:

• “water or other liquid damage”
• “bursting, leaking or overflowing”
• “sudden and unexpected escape of liquid”; or
• "ingress"

You may want to ask the insurer specific questions about the kinds of water damage they cover.

How to make a claim for water damage on home insurance

The first step you’ll need to take when filing a water damage insurance claim is documenting the damage and listing the spots in your home where mould or rot has formed. This can include taking photos or videos of any affected areas. You can then speak to your insurer to see if you can make the repairs needed to prevent further damage.

In some cases, your insurance provider will ask you to wait until their insurance adjuster evaluates the damage, in order to establish that the damage is accidental. You may also need to prove that the damage could not have been caused by an incident that your policy does not cover. 

Based on the adjuster’s evaluation, your insurer will negotiate a claim settlement with you and arrange for a contractor in their network to make the repairs to your home. Some policies will instead let you obtain a cash settlement from the insurer and arrange a contractor yourself. 

If you don’t agree with the adjuster’s evaluation, you may be able to contract an independent expert to inspect the damage to your home and negotiate with your insurer based on that evaluation.

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