Average Cost of Household Water Damage Still Climbing Despite Drop in Claims

It may be sunny outside, but water continues to cause nearly a half-billion dollars of insured damage inside California homes each year.

A continuing study by the Insurance Information Network of California (IINC) found that while the number of household water damage claims is on the decline, the average cost of water claims continues to climb.

IINC discovered that the annual cost of water claims is finally on the decline after five straight years of increases. The 81,518 claims reported by the companies in 2003 resulted in $428.5 million in insured losses, the first decline in costs since water claims data became available in 1997. Overall 2003 losses for the industry are projected at more than $500 million.

The survey tracked water claims from 1997 through 2003 for companies representing 68 percent of California’s homeowner insurance marketplace. Surveyed companies paid California homeowners more than $2.8 billion for water-related damage during the survey period.

Despite the overall decrease in claims cost, the cost of the average water claim continued to escalate, reaching $5,256 in 2003, more than double the $2,484 average water claim in 1997. The average cost per claim rose each year during the survey period. Remediation and construction costs are largely faulted for the high cost of water damage claims.

The survey also found that water-related claims comprised 30 percent of all California homeowners insurance claims filed in 2003, despite the increase in claims prompted by the Southern California wildfires. Other common homeowner insurance claims include fire, theft, liability, wind and lightning.

Based on trends of the insurers surveyed, overall industry water losses between 1997 and 2003 could be as high as $4 billion — exceeding the cost of most natural disasters.

“Homeowners shouldn’t be misled by our sunny fall weather – with household water damage, the culprit is often leaky pipes and fittings, not seasonal storms,” said IINC executive Director Candysse Miller. “By taking just a few minutes each year to inspect and maintain household fixtures and water pressure, homeowners can prevent much of this damage from occurring.”

IINC’s water damage prevention program outlines how homeowners can prevent water damage. For more information on IINC’s water damage prevention program, including tips in both video and downloadable brochure format in English and Spanish, visit www.iinc.org.