Water Exclusion Clause

A water exclusion clause is a provision in homeowner's and renter's insurance policies that prohibits coverage for certain water-related claims. Water exclusion clauses are likely to apply to damage caused by floods, tsunamis, standing water, groundwater, and drain or sewage backups.

Water damage coverage that is not included in the standard policy may be added by purchasing a rider or separate, specialized insurance.

Understanding a Water Exclusion Clause

Most property insurance policies include a water exclusion clause. The reasoning is that only certain areas are vulnerable to water-related natural disasters like floods, tidal waves, or tsunamis. Water exclusion is one of several exclusion clauses found in homeowner and renter insurance policies. Other common exclusions include earth movements (quakes, landslides), wars and other government actions, and nuclear hazards and events.

Water-related perils, on the other hand, are not completely excluded by homeowners insurance. Most policies routinely cover water damage caused by specific events within the structure, such as a burst pipe, a malfunctioning dishwasher, or other plumbing/water supply-related issues. However, gradual damage or wear and tear that occurs over time is generally not covered.

Weather-related damage, such as thunderstorms that send a tree crashing through a wall or snow that collapses a roof, allowing water to pour in, is generally covered (at least, the water damage they cause is; ironically, the cost of repairing the wall or roof may not be). Some hurricane-related damage may also be covered, though policyholders in 19 states and the District of Columbia must pay an additional hurricane deductible before coverage begins.

Special Considerations: Floods and Water Exclusion Clauses

Flooding is a common part of a water exclusion clause, unless it is caused by an internal cause, such as a gushing washer/dryer or an overflowing toilet. These clauses generally define a flood as rising or surface waters that come in from the outside, though even this definition is frequently subject to debate—and litigation: Should the clause apply if the flood is caused by man-made forces (such as a burst dam or a collapsed levee) rather than natural forces (such as continuous rain causing a river to overflow its banks)? Is surface water only derived from rain or melting snow, or does it also include water that has been sitting on a man-made surface such as pavement, a balcony, or a roof?

Regardless of the legal debate, the bottom line is that an external flood that seeps into a home is unlikely to be covered by the hazard insurance component of a standard homeowners policy. Water damage is expensive, and it is common—in 2018, water damage and freezing accounted for 23.8% of all insurance losses—giving homeowners and renters reasons to look for alternative coverage options.

Typically, this entails purchasing a separate flood insurance policy to protect against flood damage. In fact, lenders sometimes require mortgaged homeowners to carry flood insurance in high-risk areas—at least to protect the structure of the dwelling. (Unlike a standard homeowners policy, flood insurance requires a policyholder to purchase separate policies to cover both the property and its contents.) Homes financed by a federally backed lender, for example, must have flood insurance if they are in a flood hazard zone designated by the government.

Residential and commercial flood insurance policies are both available. Renters can also buy flood insurance policies to protect their personal belongings in a single-family home, apartment, condominium, or commercial property.

While flood insurance can be purchased from a variety of insurance companies, the federal National Flood Insurance Program regulates the rates (NFIP). As a result, the same policy costs the same amount regardless of which company it is purchased from.