Insurance for commercial buildings isn't intended to cover slow, preventable damage. Unfortunately, it is a problem that tends to be underestimated. Water leaks can not only disrupt daily life but also have substantial implications for insurance premiums and coverage.
It's essential to understand how water leakage fits into your insurance policy to safeguard your building and ensure financial stability.
In this post, we delve into the intricacies of water damage costs, emphasizing why proactive maintenance is crucial for upkeep and mitigating unforeseen financial strains.
Costs & Restorations
Average household leaks can waste up to 10,000 gallons of water each year. The cost of water damage restoration can increase depending on several factors including the extent of the damage, the size of the affected area, the type of water involved (clear, gray, or black), and the location.
Source of Water & Class
The first factors that will determine the cost of restoration are the source of the water, which is split into three categories, and the class of the damage, which is split into four.
Category 1, or clear water, does not contain any contaminants and is from a sanitary source. This water will cost the least. The second category, category 2, is gray water. Gray water contains some contaminants and may cause illness and/or discomfort.
Black water is the third and worst category. This water contains pathogens and is highly contaminated. Ingestion of black water can result in severe illness or even death. It might not surprise you that as the category number increases, so do costs!
The class of water damage also affects the cost in a very similar way. Class 1 includes the smallest water leaks that only happen in a small portion of the room. The second class is when damage happens to a whole room. Class 3 is when water has spread throughout the room, or multiple rooms, and permeated every part. The worst class which costs the most to repair is class 4: hurricane or flood damage.
Other Factors Influencing the Cost
The Extent of the Damage: The severity and spread of the water damage can significantly impact costs.
Affected Area Size: Larger areas require more equipment, labor, and time to restore, therefore being more expensive to repair than smaller areas.
Structural Damage: If the water has damaged ceilings, walls, or floors, they have to be replaced increasing the cost.
Time Delay: The longer water is untreated, the more mold will grow, taking significantly longer to clean.
Materials: If furniture is affected, the cost to replace them is based on what they are made of.
Labor costs: Rates charged by professionals can vary based on location, expertise, and complexity of the job.
Estimating the Average Cost of Water Damage
The average cost of water damage restoration is between $1,300 and $5,600 but can range from $450 to $13,000. The cost of labor can be anywhere from $70 to $200 per hour, and replacing parts such as the ceiling, walls, and roofs, adds to the cost.
Clean up cost by category
Category 1: $3 to $4 per square foot
Category 2: $4 to $7 per square foot
Category 3: $7 to $7.50 per square foot
Clean up by class
Class 1: $150-$500
Class 2: $550-$1,000
Class 3: $1,100-$3,200
Class 4: $20,000-$100,000
Top 3 Reasons Why Insurance Won't Cover Costs
While insurance companies are often seen as a safety net during times of need, there are crucial scenarios in which they may not cover the costs of water damage. From neglecting to take certain preventative measures to reside in high-risk areas, it is important to understand when insurance will fail to have your back.
Reason One: Failure to Take Preventative Measures
There is a general rule that states that insurance will cover water damage if the tenant could not have predicted the leak and was “sudden” or “accidental”.
However, insurance will not cover the cost if the leak is a result of a lack of home maintenance. For example, if a homeowner fails to repair a leaky roof that leads to interior damage, then the damage will not be covered and the homeowner will have to pay for the damage themselves.
Insurance policies typically require property owners to implement certain preventative measures.
Reason Two: Gradual Damage
Insurance policies will not cover damage occurring over a period of time. These policies do not cover damage from slow leaks—like deteriorating plumbing—but will cover things such as a sudden pipe burst.
Issues that occur over time are considered a result of normal wear and tear so your insurance will not take steps to cover them. Mold is almost always not covered by insurance, the reason for this being that mold tends to grow slowly over time. It is crucial to prevent mold as it can cause serious health and allergy problems.
Reason Three: High-Risk Area
High-risk areas are prone to natural disasters, such as hurricanes, floods, or tornados.
Most insurance policies do not include insurance for floods, meaning that any damage due to rising water will not be covered in a typical building. Oftentimes, insurance will not even cover areas that are near coasts because of the flooding that occurs being that flood damages are too frequent.
How to Prevent Dropped Insurance Coverage
Many insurance companies are starting to request (or even require!) early detection systems like water leak sensors.
If your insurance company is requesting a system like this, you’ll be happy to know that Perceptive Things® helps to prevent water damage from happening by providing sensors that send real-time alerts. Through our IoT Platform, we help save thousands of dollars that would otherwise have been spent on repairs.
Aside from utilizing technologies, there are a few other actions that you and your team can take to prevent dropped insurance coverage due to water leaks.
Regular Maintenance
It is highly important to do regular maintenance in your building, as it may help you and your tenants prevent leaks. We recommend gathering clues to help detect leaks before you begin investigating further. Here are indications of a possible leakage you should regularly look out for according to the EPA’s Detect and Chase Down Leaks at Home checklist:
High Utility Bills: High winter usage (over 3,000 gallons per person) or spikes in the current month from previous months may indicate possible leaks. Learn more about your water bill by reviewing the information on this website.
Water Meter: Use a screwdriver to remove the lid on your meter, and take a reading while no water is being used. If the meter value changes after two hours, you probably leak. Here are tips and guides on how to read your water meter.
Toilet Test: Add food coloring to the tank and let it sit for 10 minutes. Color showing up in the bowl means you have a leak and should consider replacing your toilet flapper. Also, ensure you listen for running water or drips in the toilet.
Water Leak Sensors that Help Prevent Dropped Insurance Coverage
You may want to contemplate buying a water leak sensor from Perceptive Things®. The sensors come tested and pre-configured, and installation can be completed within a few minutes, this helps to ensure that the sensor works correctly.
Droplet Solo™
The Droplet Solo is a water sensor designed to withstand any conditions. It is IP-67 (waterproof) rated and can be placed nearly anywhere. Common uses include under mechanical equipment, appliances, or plumbing fixtures.
Droplet Duo™
The Droplet Duo adds a bit more flexibility to water detection. It includes two probes that connect to a wireless module via a cable. The two probes are great if you need two sensors close together. Each part has its adhesive strips for hassle-free installation.
Droplet Pro™
The Droplet Pro offers water detection over a larger area thanks in part to a rope-like sensor. The sensor can be stretched out along a wall or cabinet to detect water over a long area.
Final Thoughts on How Water Leaks Affect Insurance
Understanding the implications of water leakage on insurance coverage is vital for property owners. By addressing issues proactively through regular maintenance and swift repairs, you not only protect your property but also maintain a favorable insurance profile.
Prevention decreases costs and also ensures peace of mind, knowing you're prepared for unexpected challenges that may arise. Ultimately, investing in sensors today can save you from significant financial and emotional stress tomorrow.
Has your insurance ever denied your claim regarding damage caused by a water leak? What steps did you take to prevent it from happening again in the future?
Comments