How to Prevent Dropped Insurance Due to Water Leaks
Without water damage insurance coverage, the high average restoration cost would come out of your pocket.
However, keeping an insurance coverage policy is not as simple as you may think. In fact, many building owners are learning firsthand that insurers can suddenly drop your insurance!
Although there are many reasons an insurance company may drop your water damage insurance coverage, you can easily prevent dropped insurance. Keep reading to learn how!
5 Reasons Why an Insurance Company May Drop Your Coverage Due to Water Leaks
1. Frequent or Severe Water Damage Claims
According to Insurance Europe, water damage insurance companies often assess risks according to the previous claims history. For example, if a building owner has a history of filing severe or frequent water damage claims, the insurer may decide to drop your insurance coverage.
This is because the building is at a higher risk of experiencing future water damage incidents. Insurance companies often are able to prove the correlation between repeat water damage claims and building owner responsibility.
That being said, we are not suggesting that you stop filing legitimate claims! Just remember that the fewer claims you file, the more attractive you become and the lower the risks to insurance underwriters.
This means that the reverse is also true. The more claims you file, the more unattractive you become and the higher the risk to insurers!
For most insurance companies, filing more than three claims within three years will lead to the insurer increasing the premium to offset the perceived high risks or deciding to drop the insurance coverage.
2. Neglect of Preventative Measures
According to Society Insurance, building owners are required to take proper preventive measures to avoid the occurrence of water damage.
If you fail to implement necessary preventive and maintenance measures, such as fixing water leaks promptly or contracting a maintenance team for regular plumping inspection, the insurance company may categorize it as negligence.
Insurance is meant to repair or restore water damage due to sudden and unforeseen causes. A great example from Progressive Insurance details how you might be responsible for a pipe burst due to freezing if you did not maintain heat in your building!
At Perceptive Things, we focus on helping multi-family homes and commercial buildings put preventative measures in place via water leak sensors. These sensors can help you detect issues well before human reporting in many cases!
3. Property in High-Risk Areas
The risk of insuring a building for water damage in a certain location can change over time. This may be due to how an area is perceived by water damage insurance companies or actual changes in the surrounding area.
For example, if your building is located in areas at a high risk of natural disasters, like hurricanes, flooding, and other water damage-related risks, the insurance companies may relook at their coverage policy in that location. This may include dropping all the policies in such high-risk areas!
Fortune has a great article on, "What to do if your home insurance is canceled". They cover the various reasons you might lose your insurance coverage as well as some alternative options (FAIR plans) should you be struggling to find adequate coverage in your area.
4. Failure to Make Payments on Time
Failure to make insurance payments on time is considered by the Department of Financial Services as one of the key reasons that people end up losing their insurance.
An insurer is required by law to alert their customer before dropping a policy for non-payment. So, when you make late payments, the insurer will notify you of rescinding the dropped insurance.
Each time you make late payments, all this back-and-forth is a costly administrative burden to the insurance company! Do not let late payment become a habit, as it may flag your account in your insurance company's systems and trigger them to drop your insurance.
This is perhaps the most serious reason to have your water damage insurance dropped. Insurance works on the principle of good faith and honesty by both the client and the insurer.
According to ICNZ, insurers calculate premiums based on your risk profile and insured amount, which is determined by the data you provide. It is often then compared to averages they have for other users like you!
Therefore, you should often be honest when submitting claims or filing your policy application. Any dishonesty, fraud, nondisclosure, or misrepresentation breaches the insurance contract and can lead to your insurance policy being dropped.
You will often find that dropped coverage may be the least of your concerns in this case! If you have made fraudulent claims then you may also find yourself involved in a court case.
Preventative Measures You Can Take to Ensure You Don’t Lose Insurance Coverage Due to Water Leaks
Install a water leak detection system
Using a water leak detection system to detect water leaks early ensures you reduce the occurrence of water damage and the possibility of losing insurance coverage.
We saw above that the key reasons for dropped insurance are frequent and severe water damage claims, neglect of preventive measures, and building in high-risk areas.
Installing water leak detectors can help you stop water before it causes extensive damage to your building. This is one of those cases where an ounce of prevention is worth a pound of cure!
While many water leak detectors are on the market, you may want to check our best water leak sensors to discover your ideal option. We have also shared information on our top two water leak detectors below!
The Droplet Solo™ water leak sensor
The Droplet Solo™ was recently reintroduced this year! This was our first ever water leak sensor and we are excited to bring it back due to popular requests.
We've revamped the design of this water leak sensor and it is our easiest to install... simply drop it wherever you think potential leaks may occur!
The Droplet Duo™ water leak sensor
The Droplet Duo™ is a dual-probe sensor that gives instant wireless alerts within seconds of sensing any water leak or moisture. It is easy to install and set up as it comes pre-configured for your building. It has 3M adhesive pads, making it easy to attach to any surface.
This powerful water lead detector is powered by a durable lithium battery lasting up to 4-5 years. This makes Droplet Duo™ a reliable and perfect solution for detecting water leaks in buildings without needing frequent battery replacements.
The Droplet Pro™ water leak sensor
The Droplet Pro™ is an industrial-grade detector that efficiently detects water leaks even in the harshest environments. With an impressive IP-67 rating, the Droplet Pro™ can withstand being immersed in water up to 1-meter deep!
This water leak detector has a 3-meter rope to detect leaks along its entire length. You can even customize this length up to 100 meters to protect larger areas and pieces of equipment. It also features internal magnets, making installing on iron surfaces and beams easy without needing extra installation tools or hardware.
Regularly check and maintain your building plumbing system
Every part of your building, whether it is a multi-family building or commercial building, must be in good condition. If not, water can easily begin to leak through roofs, walls, or floors, resulting in extensive water damage.
As a result, your water damage insurance companies may find you guilty of making frequent or severe water damage claims or neglecting preventive measures.
Property Casualty 360 reports that about 2,700 frequent and severe water damage claims were recorded in North America in 2020 alone, mostly caused by poorly maintained buildings and plumbing systems.
We recommend maintaining and keeping your building and plumbing systems in good condition to prevent your water damage insurance from being dropped due to negligence.
Final Thoughts on Preventing Dropped Insurance Due to Water Leaks
Insurance claims are vital in restoring water damage. Though insurance coverage can be easily dropped, we hope this article helps you prevent that from happening in your commercial space!
Installing a water leak detection system at the right places inside your building is one of the best ways to prevent dropped insurance due to water leaks.
If you have unanswered questions, please feel free to reach out to us at firstname.lastname@example.org !
Do you have unanswered questions about preventing dropped insurance due to water leaks? Or need professional help installing water leak detectors? Let us know via the comments section below!