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How making multiple water claims impacts your home insurance coverage

Making more than one water-related claim on your home insurance can impact your premiums. Here's what homeowners need to know.

A home is the largest purchase most people make in a lifetime. Home insurance policies protect this investment, ensuring the homeowner is covered for expenses related to damage caused by vandalism, fire, or specified weather related incidents (e.g. hail, wind, fallen trees, etc…).

When damage occurs to a home, the homeowner submits a claim to their insurance provider, and the provider covers the cost of repairs, assuming the problem is covered by their insurance policy

Water damage is the most common reason people submit home insurance claims. Many situations including leaky roofs, defective appliances, sewer backups, cracked foundations, burst pipes, and clogged drainage can cause water damage. 

Let’s take a look at how water and flood damage insurance works in Canada, and what happens if you make multiple insurance claims related to water damage.

What can water damage do to my home?

Water damage can cause extreme damage to your home. If your home is damaged by water, it’s crucial that the water is dried up and the source of the water is cut off immediately, because if it isn’t, the damage can become catastrophic.

Water can cause mould problems, destroy furniture, drywall, flooring and appliances, and can even cause major structural damage to the home. 

As you can imagine, this level of damage can be costly to repair, especially if you have to pay for it out of pocket. Let’s look at a few common repairs related to water damage as an example. 

When water gets into your flooring or drywall, there’s a good chance it will need to be replaced. The replacement cost depends on the size of the area and the type of materials used, but here are some examples of costs you could be looking at: 

  • Hardwood floors (removal and installation included): $15.00 per square foot
  • Cost for a 1,000-square-foot basement: $15,000
  • Carpet (removal and installation included): $4.50 per square foot
  • Cost for a 1,000-square-foot basement: $4,500
  • Drywall ceiling repair (removal and installation included): $1,500 - $5,500

Those are some expensive repairs, and you really don’t want to pay for them out-of-pocket. That’s why it’s so important to understand your home insurance policy and whether it covers water damage.

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How does flood insurance work in Canada?

Flooding and springtime thaws are the most common causes of water damage. This is when frozen pipes start to thaw, frozen moisture in the ground melts, and large amounts of snow surrounding your home suddenly becomes liquid. 

Because this happens so often and is so expensive to repair, flood damage is not often covered by a basic home insurance policy. 

For many years, it was extremely difficult to find home insurance that covered flood damage. Somewhat recently, insurance providers have begun to offer add-ons policyholders can purchase to include water damage coverage to their policy. 

The two most common add-ons are overland flood coverage and sewer backup coverage.

What is overland water coverage

When an overland body of water including a river, lake, stream or pond overflows (usually due to heavy rain), there’s a good chance it will find its way into the buildings nearby. 

Overland water coverage protects homeowners from the costs associated with repairing damage caused by groundwater getting into a home. The water usually enters the home through its foundation, window wells, basement floors or walls, and sometimes through a sewer line.

What is sewer backup coverage

Sewer backup coverage is pretty self-explanatory. It protects homeowners from having to pay out-of-pocket to repair damages caused by a sewer or drainage backup. Blockages or overflows in the sewer lines can cause wastewater to flow back into the home, leading to significant damage and cleanup costs.

What happens if I live in an area that has regular flooding?

Flood damage can happen anywhere, but certain areas are more prone to flooding than others. For example, people who live in coastal areas that commonly experience significant storms, like the maritime provinces, are more likely to experience overland flooding than people who live far from any bodies of water. 

Similarly, people who live in the mountains are also at high risk for flooding because, in the spring, melting snow runs down the sides of the mountains, overwhelming the rivers, lakes and streams below, causing floods. 

Living in areas that are prone to flooding can make shopping for water-damage add-ons a significant challenge. Insurance premiums are determined based on the level of risk the policy poses to the insurer, and it’s clear that living in certain areas can put a person at higher risk of having a flood, so insurance companies will often decline add-ons like overland water coverage. 

This means that if a homeowner sustains water damage caused by an overland flood and they do not have overland water coverage, they could end up paying the repair costs out-of-pocket.

According to the Insurance Bureau of Canada (IBC), there are about 6-10% of Canadian homes that are deemed to be uninsurable for water damage coverage by Canadian insurers. This is because the homes are located in flood prone areas that are too risky to insure due to the high probability of regular flooding each year. The lack of insurance options is frustrating for a number of Canadians, but the government is actively working to help make flood insurance an affordable option for those that need it and currently can’t get it. They’ve pledged $31.7 million laid out in their 2023 budget for creating a national flood insurance program. It is speculated that the program will be available to Canadians as soon as 2025.

What happens if I have multiple water damage claims on my insurance?

Even if you live in an area where flooding is not common, water damage can still happen. While most insurance policies with the previously mentioned add-ons will cover the costs of having the water damage repaired, if you do not correct the issue that allowed the water to enter the house, this will mean your home is at increased risk of having another flood. 

Because of this, your insurance premiums will likely increase after filing a water damage claim, and, if you submit multiple claims, there is a possibility that your water damage add-on will not be an option when it’s time to renew your policy.

The bottom line

Considering water damage is the most common reason people file home insurance claims, it’s important to be clear on how much coverage your policy provides for water damage. 

Review your current policy and consider adding on water damage protection if it’s available. 

If water damage add-ons are not available because of your claims history or geographic location, make sure you watch for early signs of water damage, and check your basement after every rain storm. Keep your gutters and window wells free of snow, ice, and any other debris that can clog your drains, and if you’re going to be away from your home for an extended period of time, make sure you have a trusted friend or family member check in on the house every few days.

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