I look at insurance policies day in and day out—it’s just a part of my job. Every now and then, I come across something that makes my head spin or causes me to do a double take.
Readers of this blog have seen some of my posts where I implore homeowners to read their homeowner insurance policies and ask questions if there are terms or provisions they don't understand. Well, most homeowners purchase policies for protection in case of fire and theft. Although water losses are the most common type of loss that result in claims, most homeowners are unaware that not all water losses are covered. That said, it is standard that a "sudden and accidental" escape of water from a plumbing system causing physical damage is covered. However, take a look at this water exclusion from this policy and also the definition of "water damage":
If you are reading it as I am, here, even a "sudden and accidental" water loss under this policy is not covered! So, a homeowner with this policy cannot be compensated if a water line under the kitchen sink bursts and sprays water everywhere; or, if a hose to the washing machine suddenly breaks during a cycle and floods the house. Although homeowners as consumers can make their own decisions who insures their home or how much coverage they want, I believe that if a homeowner was made aware of an exclusion as expansive as the one above, he would really have to think hard about whether to accept that risk.
As always, educating the policyholder is vitally important and as a firm, through this blog, we try to make as much information available and share our knowledge.