Navigating water damage insurance claims: What you need to know

Navigating water damage insurance claims: What you need to know

Kim Mercado
By Kim Mercado
Jan 12, 2024
6 min read

Water damage is one of the most common and expensive types of property damage. If you work in construction, repairs or renovations, you’re probably well aware of the nightmares leaks can cause on a job.

Leaky or broken pipes, disconnected hoses, or shoddy materials might not be immediately noticed until wet walls, stained ceiling tiles, or mysterious puddles reveal them. That can wreak havoc on your bottom line and your scheduling plans.

If a leak causes water damage, you might have to use your contractors insurance to help cover repairs if you’re at fault.

Jump ahead to learn:

What is typically covered in a water damage insurance claim?

Insurance claims for water damage can be a big problem for construction businesses, especially in the winter when pipe bursts are more common because of freezing temperatures. To ensure your business is adequately protected, you need to know what types of water damage business insurance usually covers and what it doesn’t.

Water damage insurance usually covers sudden and accidental water-related events like plumbing leaks, burst pipes, or storm-caused water damage. It can provide coverage for repairing or replacing damaged property, including building elements, equipment and inventory. It may also cover the costs of drying out and fixing the damaged areas.

However, it’s important to note that water damage insurance may have certain exclusions or limitations. For construction businesses, these commonly include:

  • Gradual water damage: Insurance policies often don’t cover gradual damage, such as leaks that develop over time due to poor maintenance or wear and tear. Regular inspections and maintenance of plumbing systems are crucial to prevent such issues.
  • Flood damage: Standard water damage insurance typically does not cover flood-related damage. If your construction business is in a flood-prone area, consider obtaining separate flood insurance (through the National Flood Insurance Program) to protect against this specific risk.
  • Negligence or lack of maintenance: Insurance claims may be denied if water damage occurs due to negligence or lack of proper maintenance. It’s essential to promptly address any plumbing issues or leaks and document all maintenance activities to demonstrate diligence in preventing water damage.
  • Mold remediation: While insurance may initially cover water damage, it often doesn’t cover mold cleanup. Mold can develop within 24-48 hours after water damage occurs, so addressing it quickly is vital to preventing more damage and health risks.

How to prevent water damage insurance claims

The good news is that most water damage claims can be prevented if you take a few precautionary steps before you start work and while the project is underway.

Here are a few things you can do to reduce the chances of running into issues with water damage:

1. Brief all employees and subcontractors

You can train your employees to identify potential sources of water damage and reduce those risks.

Create a written document or have regular training sessions so all your employees and subcontractors are up to speed before beginning work. Damage caused by water is not only costly to your balance sheet but also to your reputation.

2. Observe the jobsite

Thoroughly check out the jobsite and note all potential risks for water damage. Is there anything unusual about this site that could cause problems down the road?

For example, if you’re a handyperson hired to hang pictures in a client’s basement, check where the water pipes are so you don’t inadvertently drill into one. If you’re a general contractor, show your employees how to locate and operate the main water shut-off valve in different types of residences and commercial properties.

3. Inspect all materials and equipment

You and your employees should inspect all equipment and materials used to complete the job to ensure they are not faulty or damaged.

Double-check that temporary or permanent seals or insulation are waterproof and test them as you progress with your project to ensure they’re performing as advertised.

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4. Account for a change in weather

Ensure you and your employees know any weather conditions that may affect your jobsite. Frozen water pipes that later burst and cause a huge mess are the most common source of water damage in cold weather. If water isn’t coming out of the taps, that’s not a good sign.

While you can’t control how a homeowner tries to prevent frozen pipes, ensure you and your employees don’t use propane or kerosene heaters or an open flame device to thaw the pipes once you’re on the scene. A potential fire could be much worse than burst pipes.

Heavy rain and wind can also be problematic for various jobs — especially exposed roofs, walls and foundational work. Ensure any tarping covers the area without gaps or sagging. Create an overlap of several feet to ensure water seepage doesn’t get under and into seams.

Weather monitoring should include daily updates as well as noting any sudden changes. Materials and contingency plans should be ready to implement at a moment’s notice to account for sudden changes in the weather like hail, thunderstorms and freezing.

5. Respond quickly to water damage

If a water leak occurs, a prompt response can drastically reduce the damage and cost of an incident. Have a plan in place to prepare you for an incident. Give your client after-hours contact information so you’re easy to reach in an emergency and keep all repair tools and equipment easily accessible in case you need to respond in a hurry.

For example, if you’re a plumber and you accidentally disconnect a client’s dishwasher intake hose and it leaks overnight, make it your priority to set it right as soon as you realize what’s happened.

What to do if you have to file a water damage insurance claim

Even if you and your employees do all you can do to prevent water damage from happening, accidents and unexpected incidents can happen. Business insurance can help cover related costs for repairs. Here’s what to do:

Step one: Determine the source of the water and stop the flow

Find the source of the water damage and stop it if possible. For example, if it’s a burst pipe, turn off the water supply to that area or the main water supply to your property.

Ensure safety — if electrical risks are present, turn off the affected area’s electricity. Evacuate and notify authorities if the water leak is severe or threatens the property’s structure.

Step two: Document the damage

Take photos or videos of the affected areas and any damaged items. Capture any water-related damage, such as damaged walls, furniture, appliances, water-logged items and rusted property.

This documentation will be essential when filing an insurance claim. It can serve as evidence of the extent of the damage.

Step three: Reduce further damage

Most insurance companies will only cover the initial water damage claim. Act quickly to prevent the water from spreading and causing additional damage.

  • Use towels or mops to soak up standing water
  • Use buckets to collect water from roof leaks
  • Air out the space
  • Remove or place plastic sheets or tarps to cover furniture, equipment, or any valuable items
  • If a broken door or window caused the water damage, board it up

Step four: Talk to your insurer

Contact your insurance provider about the situation as soon as possible to start the claims process. Tell them about all the damage and include every detail of the complaint made by a customer.

Some insurance companies will require you to call to report a claim. Others (like NEXT Insurance) will enable policyholders to file a claim online through an online form, virtual assistant or mobile app.

When you make a water damage claim, your insurer will investigate the claim to confirm what happened. Once the claim review is complete, your insurance adjuster will let you know if it is approved or denied.

How NEXT Insurance protects you from water damage expenses

Part of being prepared is having appropriate insurance coverage, such as general liability insurance, which will help pay for residential or commercial property damages. Errors & omissions insurance can help pay for alleged work oversights that cause a client a financial loss. It also helps cover the costs to defend your business or fix the problem.

NEXT specializes in helping construction professionals find the right coverage at an affordable price with our painless online process. Answer a few basic questions about your business to get an instant quote, explore coverage options and access your certificate of insurance.

Start an instant quote today.

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Kim Mercado
About the author
Kim Mercado is a content editor at NEXT's blog, where she writes and edits posts for small business owners. She enjoys helping entrepreneurs solve their business challenges and learn about insurance. Kim has contributed to Salesforce, Samsara and Google.

You can find Kim trying new recipes and cheering the 49ers.

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