How will home insurance cover water damage?

Every property faces the risk of water damage of some kind sooner or later, so taking precautions and being prepared is practical. A burst tap or overflowing sewer can cause water damage, as can a leaky dishwasher or air conditioner. 

Leakage and seepage of water, often referred to as gradual damage, can occur in a number of ways and can worsen over time, potentially requiring more significant repairs. As a homeowner, it’s sensible to inspect your property every so often, as your home insurance policy may not cover repair costs, citing negligence or poor maintenance.

What water damage are you covered for?

Coverage provided by home insurance policies can differ company to company and policy to policy, so it’s best to check your individual product disclosure statement (PDS) for specific clarification. 

Accidental or sudden water damage, a result of storms or floods, is usually covered by home insurance. However, water damage incidents account for almost a quarter (24%) of all home insurance claims, according to a recent survey released by Australian insurer QBE. For this reason, insurers will regularly look to ascertain whether the damage may have been gradual, which may result in a denial. 

As a homeowner, you’ll need to establish, beyond doubt, that any water damage to their 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, and you will have to negotiate with your insurer before any serious repairs can be done.

What to know about 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. Home insurance coverage can vary wildly, and the terminology typically gives you the best indication of what a policy will cover. In the event of water damage, the common phrase to look for is “escape of liquid”, although some insurers may refer to it by one of the following terms: 

• “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 regarding the possible kinds of water damage. For instance, you may have an air conditioner from which water starts dripping after a few years of use. If this happens while you are travelling or otherwise not present at home, the walls and flooring of your home 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.

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. 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. Based on your policy, you may be able to arrange for a contractor yourself and obtain a cash settlement from the insurer. 

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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