Insurance Coverage: Water Damage v. Flood Damage

By Remmie Butchko, CIC

Georgetown Insurance Service, Inc.

Silver Spring, MD


There is often confusion over Property Insurance losses that involve water damage. For many property owners, flood damage and water damage get lumped into the same bucket. Basically, “my stuff got drenched and now it is a mess (or even destroyed).”  But in the insurance world, not all water damage is created equal—and the difference can mean coverage versus no coverage.

Here is an example:

On a Monday morning our office received a panicked call from a policyholder stating, “I came into my building this morning and the whole thing was flooded over the weekend!”

Insurance coverage will ultimately depend on exactly what caused the damages. Was the building “flooded” by a burst water pipe, or was the building “flooded” by a severe rainstorm that occurred over the weekend?  The difference between the two sources of the water damage is critical because (a) one is probably covered by insurance and (b) the other is likely excluded from coverage.

Virtually all property policies exclude flood damage.  In simplistic terms, if the source of the water damage is from the ground (either from below the ground or surface water), it is probably considered to be a flood.

On the contrary, most property policies cover water damage if the source of the water is from the building itself including plumbing, heating systems, fire protection systems or other equipment. However, there is typically a limitation for damages due to freezing if heat is not properly maintained.

In situations where a property owner has experienced a water loss it is very important to properly report and document the source of the water causing the damages.  It is equally important to include this information when reporting the loss to the insurer so that a proper coverage determination can be made.

It has been our experience that once a claim is denied (i.e. by reporting that a building “flooded” when in fact a pipe burst), the process can be cumbersome and time-consuming to have the decision reversed.  In addition to the time and frustration involved in overturning an improper claim decision, there is also the added pressure of slowing down the payment for the damages.  Clean-up and restoration following a water loss can be a messy process, and the last thing anyone needs is for insurance money to be slowed down due to simple semantics.

The good news is that if naturally occurring flood damage is a risk for a property owner, there are typically some resources available:

  • National Flood Insurance Program can provide protection from flood losses not typically covered by Property Insurance.
  • Property Insurance can typically be modified to cover water damage caused by sewer, drain and sump system backups. This type of water damage is usually considered to be flood-related and often excluded, but the coverage can be added to most policies for an additional premium charge.
  • For commercial properties, some underwriters will add a Flood Coverage Endorsement which will modify the policy to void the typical exclusionary language for flood damage, therefore covering flood losses.

As with any insurance issues, it is best to have these discussions with your insurance provider before there is a problem.  Depending on a property owner’s need and expectations in the event of a loss, there are many options to procure coverage for losses caused by water.

Have questions? Contact us to speak with a licensed insurance professional.

Disclaimer: All data, information, and opinions provided on this article, newsletter, or blog is for informational and educational purposes only. While every caution has been taken to provide readers with the most accurate information and honest analysis, please use individual discretion before making any decisions based on the information in this article, newsletter, or blog. Georgetown Insurance Service, Inc. is not responsible if its readers happen to experience loss, injury, or damage resulting from its display or use. All information is provided on an as-is basis. This article, newsletter, or blog does not represent the thoughts, intentions, plans, or strategies of any specific Insurance Carrier, Georgetown Insurance Service, Inc. partner or affiliate.
Have questions? Contact Us to speak with a licensed insurance professional.

Leave a Reply

Your email address will not be published. Required fields are marked *