By Anne Martin
As a high-net-worth personal lines risk manager who specializes in water damage mitigation, I speak to homeowners frequently about the peril of water. Although water damage is the most frequent cause of loss to luxury homes, most people don’t appreciate the specific impact it could have on them—and therefore don’t take proactive steps to avoid it.
For those of you who advise homeowners—high-net-worth or otherwise—you likely know the challenges that come with promoting preparedness. Following are the water damage assumptions we encounter most often, along with the real facts based on our analysis of thousands of water damage claims. Anticipating and dispelling these notions upfront will hopefully help your clients sidestep costly losses (and headaches) in the future.
MYTH: “It won’t happen to me.”
Internal plumbing system water losses (from the pipes or water-based appliances and fixtures in the home) are the number-one cause of damage to high-net-worth homes. Water damage occurs more frequently than fire, theft, flooding or any other type of home loss. Even if they haven’t experienced one firsthand, most people know someone who’s had a water loss. Those in the northern parts of the U.S. are particularly vulnerable, as frequent and prolonged periods of severe cold can cause the pipes in hundreds of homes to freeze at the same time.
MYTH: “I had water damage in my home. But now that we fixed the cause, it won’t happen again.”
It’s understandable for homeowners to consider water damage to be an unlucky, one-off event. However, our data revealed the opposite to be true. Claim data analysis shows that a home that’s had an internal system water loss is at least twice as likely to have another water loss, even after the original repairs were made. In some cases, it’s up to 3.5 times more likely to happen.
MYTH: “A water loss won’t really impact me, because my insurance company pays for the damages.”
Because in most cases water damage costs will be covered by one’s insurance company, people assume there will be little to no additional impact to their lives. That assumption could not be further from the truth. A reimbursement check cannot restore sentimental or one-of-a-kind items ranging from children’s artwork and cherished letters to delicate heirlooms and other original documents. Family members may have to live through disruptive repairs or be displaced from their home altogether. It can also take weeks or months to replace furniture, flooring, cabinetry, and other furnishings—particularly when items are custom-made. In fact, the average water damage claim duration for a high-net-worth home is between two and three months, with many claims lasting much longer. Increasing concerns about mold issues also add to the time required for remediation.
MYTH: “I have a high-end home, so I’m less likely to have a problem.”
Water damage claims have been on the rise for the last decade, particularly in the high-net-worth segment. High-net- worth homes inherently have more exposure, as they typically have more than 40 water points in the home – five or more bathrooms, multiple dishwashers, icemakers, wet bars, Jacuzzis, steam showers, and more. The more water points in a home, the higher the loss frequency. Each water point represents an opportunity for failures linked to connection points, supply hoses, valve assemblies, as well as the fixtures and appliances themselves.
MYTH: “Water damage isn’t that expensive to repair.”
In addition to exposure for increased frequency, high-net-worth homes face much higher loss severity. These properties often feature customized wall, ceiling, and floor finishes, custom trim and woodwork, imported materials, expensive electronics with extensive wiring, and bespoke amenities like wine cellars, golf simulator rooms, and home theaters. Even a little bit of water in the wrong place causes a catastrophic loss. For example, one section of damaged custom wood flooring may require an entire level of the home to be replaced.
MYTH: “There’s nothing I can do to prevent water damage.”
This won’t come as a surprise to insurance professionals, but there are many ways homeowners can combat the likelihood and severity of water damage. See the Tactics to Mitigate Water Damage recommendations:
|Tactics to Mitigate Water Damage|
|• Implement scheduled maintenance plans for HVAC systems, plumbing systems (including water heater review), fire sprinkler systems (conducted by a certified fire sprinkler company), sump pump systems, and roofing systems.|
|• Use steel-braided hoses on washing machines rather than rubber ones, and replace them every ten years.|
|• Regularly inspect water supply lines under sinks and appliances. Replace inexpensive plastic tubing and valves with metal or steel-braided connections.|
|Water Damage Mitigation Devices|
|• Install automatic condensate backup shutoff systems for air conditioning systems in HVAC air handler drip trays in case drain lines clog and back up.|
|• Install individual appliance shutoff systems on washing machines, hot water heaters, or dishwashers. If they start to leak for any reason, the water to that appliance will shut off immediately.|
|• Install centrally monitored water sensors at water points in the house to send an alert if anything leaks or overflows.|
|• The best protection is to install a whole-house shutoff, which acts as a 24/7 security guard for the home’s domestic water supply. It can sense a leak anywhere in the house, including pipes, fixtures, and appliances, and shut the water off before major damage occurs. Many of these devices are now IoT enabled, with apps that notify homeowners of issues such as freezing temperatures or unusual water use.|
|Other Proactive Best Practices|
|• Damage will naturally worsen if no one is home to detect a problem. When clients are away, they should arrange for a neighbor or caretaker to check in daily. A walk-through should include every floor and room with a water-consuming appliance.|
|• During subfreezing temperatures, vacant homes should be checked twice a day. Also encourage cold weather protocol including opening vanity doors to allow heat in, allowing a slow drip of water in bathrooms most susceptible to freezing, and making sure heat is kept at 65 degrees or more.|
|• Install a basement sump pump. If one is already in place, make sure it has a backup power supply.|
|• Install a permanent backup electrical generator to power critical systems, such as the furnace, alarm system, and sump pump.|
|• If planning renovations, consider installing additional loss prevention measures that are best done during construction.|
MYTH: “Whole house shutoff systems are too complicated.”
Whole-house shutoff devices provide the best protection from a catastrophic internal system water loss. Initially there may be a learning curve, as with any new home, but most devices are now Wi-Fi connected and app enabled, making them more user-friendly than ever. AIG Private Client Group surveyed a group of clients who had installed automatic, whole-house shutoffs over a nine-year period. More than 92% said they would install one again. Additionally, the devices reportedly caught leaks in more than 32% of the homes involved in the study, preventing extensive damage outright. Another study found similar results, indicating that whole-house shutoffs can reduce up to over 90% of all internal system water claims.
MYTH: “Water damage isn’t my fault, so it won’t impact my ability to buy insurance.”
Homeowners undoubtedly have a responsibility to try and protect against the next loss. More carriers are seeing similar trends regarding water damage recidivism. As a result, some are not renewing homes with multiple water losses, or are requiring the installation of mitigation devices. In a study by the California Department of Insurance, 25% of the companies (surveyed) refused to renew the policies of customers who made one or two non-water damage claims in the past three years. And 32% refused to renew policies for people who made one or two water-loss claims in the past three years2.
With luxury home claim costs increasing dramatically due to loss frequency, costs of materials and professional services, and the growing health concerns due to mold, carriers need to partner with their brokers, agents, and clients to raise awareness of water damage risk and its related repercussions.
Fortunately, you’re also in a position to empower clients to take action and lessen their chances of becoming another water damage statistic. Consult with the carriers you represent, particularly those with in-house loss mitigation capabilities, to devise the most effective strategy in your locale.
About the Author: Anne Martin
Anne is the head of the AIG Private Client Group Water Damage Mitigation Team and has been in the insurance industry for 30 years in a variety of departments—bodily injury claims, risk management (commercial and residential), and loss prevention. With AIG for 11 years, she is a certified Level 1 Thermographer and a certified Continuing Education instructor. In the course of her career, she has inspected/assessed thousands of homes throughout the U.S., including the homes of some of the most prominent profile people in the country.