Will Homeowners Insurance Cover Water Damage? It's Complicated

Here's what determines if water damage is covered.

Water damage accounts for more than 1 in 5 homeowners insurance claims and causes billions of dollars in losses each year, according to data from the Insurance Information Institute.

Homeowners need to be aware of the risks associated with water damage to their properties and must ensure they have the right protections in place to reduce the chances of financial devastation in case water-related issues occur.

One of the key things homeowners need to know is exactly when water damage is covered versus when it's excluded. The answer to this question can be more complicated than many people realize.

What homeowners need to know about water damage coverage

While many property owners assume homeowners insurance covers virtually all common causes of damage to their home and possessions, this is not necessarily true when it comes to issues caused by water.

Homeowners insurance covers water damage in some circumstances but not in others and it depends on the cause of the problem and the specifics of the policy. Most standard insurance plans do provide coverage for:

• Frozen or burst pipes that cause water damage
• Rain-related water damage if the problem is caused by wind
• Leaks from appliances such as refrigerator ice and water lines or washing machines

In some cases, home insurance will also cover water-related damage if a sewer or a drain backs up, but other insurers exclude this unless the homeowner buys a separate backup sewer rider.

What home insurance never covers, however, is water damage that results from a flood. If rising waters are the cause of the problems inside of the property, then standard homeowners insurance coverage will not offer any financial assistance to the homeowner to repair or rebuild.

As the Insurance Information Institute explains in a short-hand summary, water damage from the "top down," is covered by standard policies but damage from the "bottom up" is excluded.

How to make sure a property is covered

Homeowners need to know whether purchasing a sewer rider is important to get their home protected in case of sewage backups. They also need to understand the exclusion for flood damage that applies to standard home insurance policies.

Purchasing a rider to add sewer coverage is typically easy and inexpensive because the same insurance company that covers the dwelling can just add this protection to existing coverage. But getting insured against floods is a little more complicated.

Most standard insurers don't just allow add-on protection against rising waters. Instead, homeowners need to buy a specialized policy. Most often, this comes from the National Flood Insurance Program (NFIP) operated by the federal government, although there are also some private insurers that offer stand-alone flood coverage.

Homeowners need to buy this flood insurance protection before water damage happens. If they have a mortgage loan and are in a flood zone, lenders usually require this. Even when flood insurance isn't mandatory -- such as for homeowners who don't have a loan or who are just outside the flood danger zone -- it may be a good idea to put this protection in place.

Flood insurance can be relatively affordable, and it is a lot better to have comprehensive coverage against water damage than to get stuck paying to rebuild a home and replace property if the worst occurs.