Water Damage and Your Homeowners Insurance: How a Claim Works, Step by Step, and Who to Hire

What Your Homeowners Policy May Cover for Water Damage

Your homeowners insurance policy usually covers water damage that happens suddenly and unexpectedly. For example, Washington’s Office of the Insurance Commissioner says that sudden and accidental leaks, like a broken washing machine or leaking plumbing, are usually covered if you report them quickly. Burst pipes, including frozen pipes, are also usually covered if you properly heat your home. However, homeowner insurance usually does not cover damage from gradual leaks, such as a dripping faucet, or water leaking from a cracked foundation or gaps in walls.

Regarding mold, fungi, rust, or rot, these are usually not covered unless they result from water damage your insurance policy does cover. Some policies might offer limited mold coverage. The National Association of Insurance Commissioners (NAIC) states that most homeowners policies offer limited or no coverage for damage caused by mold, or by sewer or drain backups and sump pump overflow. You might be able to buy an endorsement, which is an add-on to your policy, to cover these specific events. It’s important to know that homeowners policies do not cover flood damage.

Filing Your Water Damage Claim: A Step-by-Step Guide

Filing a claim correctly can help you get the support you need. Here are the steps:

• Consider your deductible. The NAIC advises finding out your deductible first. This is the amount you pay out-of-pocket before your insurance coverage begins. If the repair cost is less than or close to your deductible, you might decide to pay for the repairs yourself without filing a claim.
• Report the damage right away. If the damage is significant, notify your insurance company or agent as soon as possible. The amount of time you have to report a claim varies by state. Provide your policy number, name, address, phone number, and explain what happened and how much damage there is.
• List and photograph all damaged property. The Texas Department of Insurance (TDI) recommends making a detailed list of all damaged items. Take clear photos and videos of the damage before any cleanup or repairs begin.
• Keep damaged items. Do not throw away damaged items until an insurance adjuster has had a chance to see them. The adjuster is the person who assesses the damage on behalf of the insurance company.
• Make temporary repairs to prevent further damage. Take steps to protect your home from more damage. This might include turning off the water supply or covering a broken window. However, only make repairs necessary to stop further damage. Keep all receipts for materials and services related to these temporary repairs.
• Do not make permanent repairs yet. Wait until your insurance company tells you it’s okay to make permanent repairs. Doing so too soon could affect your claim.
• Walk through with the adjuster. When the insurance company’s adjuster inspects the damage, walk around with them. Point out all damaged areas and make sure nothing is missed. You might want your contractor to be present to discuss estimates with the adjuster.
• Fill out a proof-of-loss form if asked. Your insurance company might ask you for more information to investigate your claim. This could include filling out a proof-of-loss form, which is a sworn statement about the damage and its value.

What to Do If You Disagree with Your Insurer

If you and your insurer disagree about your claim, you have options:

• Try to resolve it with your insurer. The NAIC suggests first trying to resolve disagreements with your insurer. Do not feel rushed or pressured to agree to something you are not comfortable with. Having your contractor meet with you and the adjuster might help.
• Tell the company why you disagree. If you disagree with the adjuster’s final estimate, tell your insurance company why. The TDI recommends explaining your concerns, as the company may have overlooked something. Send any supporting documents, such as a contractor’s estimate for the repairs, to back up your position.
• Check your policy for an appraisal clause. If you still disagree about the value of the claim, your policy might include an appraisal clause. The TDI explains that in an appraisal process, you and the company each hire an appraiser. These two appraisers then choose a third appraiser, called an umpire. If the two initial appraisers’ estimates differ, the umpire makes the final decision, which is binding on both you and the company. You pay for your appraiser and half of the umpire’s expenses. Check your policy for any deadlines to demand appraisal.
• Contact your state insurance department. The NAIC states that if you have trouble or questions about your claim, your state insurance department has consumer services staff who can help you work with your insurer to resolve disagreements. In Texas, if you think an insurance company has treated you unfairly, you can file a complaint with the Texas Department of Insurance.

Hiring Contractors for Water Damage Repairs

Once your insurance company determines the damage is covered, you have the right to choose your own contractor. Washington’s Office of the Insurance Commissioner says your insurance company may suggest contractors, but you are not required to use them. Choose a contractor who meets your standards and your insurance company’s requirements.

Here’s what the NAIC’s Post-Disaster Claims Guide suggests you check before hiring a contractor:

• Get identification. Ask for a copy of the contractor’s identification, including their name and the name of their business.
• Verify business license. Ask to see their business license and check its expiration date.
• Confirm insurance. Ask for proof of workers’ compensation insurance and liability insurance. The proof should include the insurance company’s name, phone number, and policy number. Call the insurance company to verify the coverage.
• Understand licensing vs. registration. Some contractors are licensed, meaning they have passed exams and met requirements to show competence. Others are registered, which means they have provided contact information to a government authority.
• Ask about permits. Inquire if the contractor will obtain the necessary building permits for the work.
• Get multiple estimates. Get estimates from more than one contractor to compare prices and services. Make sure all quotes include the same work items.
• Check references. Ask for and check references from previous clients.
• Be wary of large upfront payments. Reputable contractors usually do not ask for a large payment upfront.

Always get promises about the work in writing. If a contractor asks you to sign an assignment of benefits, be aware that this document could affect your rights. It might allow the contractor to negotiate, make decisions, and settle the claim directly with your insurance company without your approval. Talk to your agent or company before signing it. If a contractor suggests an upgrade, make sure you understand your coverage. If the work goes beyond restoring your property to its previous condition, you may have to pay the difference yourself.

Considering a Public Adjuster

A public adjuster is someone you hire and pay to negotiate with your insurance company to settle your claim. The NAIC notes that public adjusters are not attorneys or government employees. In Texas, the TDI states that hiring a public adjuster is an option if your claim is denied or if you believe your insurance company should pay more for repairs.

• Licensing. Not all states allow public adjusters, but those that do require them to be licensed and follow guidelines. In Texas, public adjusters are licensed by the TDI. You can check with the TDI to verify a public adjuster’s license and see how many complaints have been filed against them.
• Fees. Understand how the public adjuster’s fee is structured. The TDI states that it can be based on the total amount of the claim settlement, not just the amount you’re disputing. You can ask for the fee to be written into the contract as a dollar amount instead of a percentage, and you can try to negotiate a lower fee. Even if your insurance company does not increase its offer after you hire a public adjuster, you might still have to pay their fee, and you will still owe your deductible.
• Texas-specific rules. Under Texas law, a public adjuster who works on your claim cannot also act as your contractor. Public adjusters cannot practice law or give legal advice, nor can they prevent you from talking with your insurance company.