One of our properties recently had a ceiling leak over the kitchen. The shower in the bathroom above the kitchen had developed a crack in the ceramic tile surround materials and was allowing a steady stream of water through the floor to the ceiling below. The owner wanted to file an insurance claim for the damages under their homeowners insurance. The insurance company did not want to cover this as they considered it to be a maintenance item and not an abrupt catastrophe.
Homeowners Policy Exclusions
The owner reviewed his homeowners insurance policy and confirmed that the language regarding water damages is a “sudden loss.” So, the floor and ceiling damages were likely not sudden. You are better to have a burst pipe than a leak like this one develop if you want to file an insurance claim. It is unlikely that the leak just suddenly created the damages.
Get A CLUE
There is another issue to be considered also. Anybody with a homeowners policy today should be aware that insurance claims trigger a report to the Comprehensive Loss Underwriting Exchange (CLUE). This Exchange has been set up by the insurance companies to track properties, owners, and the number of claims for each. A record of claims can render a property, or owner, non-insurable. It also provides underwriting information to support the structure of premiums and deductibles.
Is The Benefit Worth It?
Any time you have a potential insurance claim ask yourself if the cost is worth the potential damge to the property’s, or your, insurability. For example, lets say last year you owned a property that lightning struck and caused $40,000 of damages. Another property had hail damage and required a new roof for almost $8,000. Both of these are claims you filed under the property’s homeowner insurance. Now, lets say you have this leak out of a shower and can prove that the losses are sudden. It is estimated the repair to the shower, subfloor, and kitchen ceiling will be $2500. You have a $1,000 deductible. First, consult with your insurance agent. Be prepared. Filing a claim where you are going to net $1500 will likely cost you more in the long run! Due to the previous claim history on your properties, and the records kept in the underwriting exchange, the long term affect of another claim may be cost prohibitive.
As a property owner, you need a great team. Your insurance agent needs to be available to answer these types of questions and help you assess whether filing a claim is a cost effective idea. If you do not have a good agent, ask your manager for a referral.