Water Damage: Knee Deep in Confusion


There’s a saying in the insurance industry:  “water is the new fire.”

The Insurance Bureau of Canada reports on their website, based on recent estimates, the Canadian insurance industry pays $1.7 Billion each year in claims due to water damage.  Aviva Canada reports paying out more than $111 Million in property water damage claims in 2012 alone.

It has indeed become the catalyst for the recent changes in the insurance industry in terms of reduced limits of insurance and higher deductibles.

I could go on at great length about property insurance and water damage, but in reality, that would take several blogs:  What kinds of coverage are there? What’s covered?  What’s not covered? What can I do to protect myself?

I’ll start with overland flooding.  I can tell you from experience many people think they are covered for flood.  Perhaps it’s thought of in a broad sense or broad generalities, whereas when it comes to insurance, water coverage is very specific.

In fact, a 2004 Pollara survey conducted for Insurance Bureau of Canada found that nearly two-thirds of Canadians (61%) mistakenly believe their home insurance provides coverage for overland flooding.

The Insurance Bureau of Canada uses this definition for overland flooding:  “Overland flooding occurs when water from rivers, streams or other bodies of water flows onto dry land and causes damage to a home”

The Institute for Catastrophic Loss Reduction defines overland flooding as “water that flows over the surface of public or private property and can enter homes and building through doors, windows, vents and other above ground openings.”

You may be covered for sewer back up.  Your policy in all likelihood covers you for the sudden escape of water from pipes or a domestic water appliance.  And I highlight sudden for a reason.  You may be covered for ice damming.  But you are not covered for overland flooding as described above.   Nor are you covered for water seepage through your foundation.

Yet again, things are changing in the insurance industry and water damage and how they are responding.

AVIVA Insurance has responded by introducing their Overland Water Endorsement.

AVIVA’s Overland Water Endorsement offers protection for loss or damage related to water entering a property from the sudden accumulation of water from heavy rains, spring run-off, or overflow from lakes and rivers.  It works in conjunction with their Sewer Back up coverage.

Time will tell if and how many other insurance companies will follow suite.

Do you know what you are covered for when it comes to water damage?  Then talk to  your broker and seriously consider the overall cost effectiveness and consequences if you choose not to purchase optional coverage when it comes to water damage.

Not enough information here about flooding or water damage?  Then ask a question and start a conversation!