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A water damage issue is one of the matters that spruce up on homeowners. It’s one day and all is good for you, and the next day, after you pull up a soaked floor, you find a pipe that has broken behind a wall. With a smart home water leak detection policy, you will be rewarded for finding these issues and potentially prevent them from forming a claim.
I want to explain to you how these things work, what kind of insurance companies provide discounts for them and about how much you could save. If you have been contemplating installing one, and thought that the numbers were too much, they might astound you.
Why Water Damage Is Such a Big Deal for Homeowners
In the U.S. claims against homeowners insurance policies are most likely to be caused by water damage, more than the combined total of fire and theft. The EPA’s data is bound to come as a surprise to many: household leaks account for approximately 900 billion gallons of water lost in the U.S. annually. That’s not a typo. It’s occurring in bathrooms, basements, laundry areas, kitchens and anywhere across the country… and sometimes no one realizes until the damage has been done.
Another common misconception about water damage claims is that they are not as prevalent as they are believed to be. Approximately 28.6% of homeowner’s insurance claims are caused by some type of water damage and around 1 out of 50 homes will have a claim involving water damage each year. If it does occur it’s not cheap — the average payout is more than $11,000, with some sources citing it to be closer to $12,500.
It is possible for you to have a burst pipe at work. It’s possible for a wall to leak slowly, without anyone realizing it for weeks. Or a washing machine hose can simply blow while you’re sleeping two rooms away. No one’s compelled to have bad fortune, but a problem like these are a familiar part of life of older homes, and sometimes of newer ones as well.
The Smart Water Leak Detection System works by using a sensor to detect the water leaks.
Smart water leak detection uses sensors or flow monitors to detect moisture, abnormal water flow or pressure changes and instantly alerts you to the leak before damage occurs, via a cell phone. There are a variety of different kinds of devices available, but they aren’t all the same.
Point sensors are placed close to a certain risk zone like under a sink, behind a washing machine, next to a water heater, and they alert when moisture is found. They come in at a low cost ($20-$35), are readily available and simple to install around a home.
Flow monitors connect to your primary water line, and monitor water use throughout your home. They get to know what is “normal” for your house over time, and will alert you to anything out of the ordinary, including a drip that you may never notice. The relatively high number of water damage claims, which is about six times the number of fire damage claims, is part of the reason these monitors are so popular as a premium discount, says Farmers Insurance.
All in one systems take it an extra step. Water shut-off devices such as Moen’s Flo or Phyn Plus can read water pressure, water flow and water temperature and some will automatically turn off the water when they sense a big leak. These are the most effective, but tend to be the most expensive and may require a plumber to install.
These devices are eligible for discounts at what Insurers?
Major U.S. insurers that currently have smart water leak detection device premium discounts for their homeowners policies include: Farmers, Liberty Mutual, USAA, Amica and Mercury. The type of coverage, and the amount of savings, will differ from state to state and from provider to provider, but here’s a general idea of the types of coverage available and how much you save, according to information NerdWallet compiled.
| Insurer | Typical Discount | Notes |
|---|---|---|
| Farmers | 5% – 20% | Larger discounts for professionally monitored devices |
| Liberty Mutual | Up to 10% | Requires an approved smart water monitoring device |
| USAA | Varies by device | Requires at least two leak detectors and app data sharing |
| Amica | Varies by device and location | Offers discount codes for select brands |
| Mercury | ~$75–$100/year | Partners directly with Flume and Beagle Services |
I won’t let that final line pass as it deserves to be considered for a second. A device that costs less than $100 can save you money on your insurance for most of your policy.In addition to any damage prevented, a device that costs less than $100 can save you money on your insurance for most of your policy, says Mercury Insurance.
What Insurers Actually Want to See
Most carriers are not going to simply believe you. Some ask you to provide some usage data from the app which helps them know that the device isn’t in a drawer somewhere, but rather is actually being used. Others request a certain brand or model as not all devices are available on the market that are suitable for them.
If you are looking for one, it’s best to contact your insurance company before you make any purchases. Inquire about the brands they know, if they’d like to have continuous access to the data, and if they have to complete paperwork to receive the discount. When you call someone it can save you 5 minutes from purchasing something that you are not qualified to buy.
What’s the maximum amount you can save?
The smart water leak detectors are usually able to save the homeowner 5% to 20% on their insurance premiums, and thousands of dollars in water damage claims. Depending on the homeowner, discounts typically range from 5% to 15% off of the homeowners premium, but a few companies offer up to 20% for a professionally monitored, complete whole home system.
There’s another type of savings that can be overlooked, but is just as easy to overlook: avoided claims. A sensor that will detect a leak and alert you at an early stage will save thousands of dollars in flooring, drywall and mold remediation. Claiming doesn’t only require you to pay a deductible, it could also impact your premium at renewal time, and even affect you for years following.
A few brands offer even more sweetness. For instance, Moen offers a FloProtect subscription that will cover up to $5,000 worth of deductible reimbursements, in addition to any insurer discount your policy offers for coverage.
Homeowners Insurance and what it does and doesn’t cover.
Homeowners insurance will protect you against sudden and accidental water damage, but most won’t cover water damage due to poor maintenance if it happens over a period of time. This is a stumbling block for people. Typically it does not include any damage that has accumulated because of a slow leak that’s been in place for months, as this is considered a maintenance problem instead of an accident.
This is an important distinction which is not always recognized. A leak detector isn’t simply useful for saving you cash on premiums. It may mean the difference between having a problem that is caught as an uncovered, sudden incident and a problem that is found three months after it goes unreported as a maintenance item.
Flooding caused by some other factor, such as a storm surge or an overflowing river is a completely different issue and is not insured under normal homeowners’ insurance policies. That will take flood insurance, but that’s another story.
First, let’s check out the beginning of a simple setup approach to getting started.
It’s not necessary to wire your entire home all at once. Most homeowners begin with the smaller and gradually work their way up.
- Initially install point sensors in high risk locations. The kitchen sink, washing machine tub and the water heater cover are the most frequent failure sites.
- If you have a sump pump, place a sensor close to it as one of the most common issues that can lead to basement flooding is failure of the sump pump.
- If you’re looking to provide a comprehensive solution without having individual sensors throughout the home, you may want to consider a flow monitor.
- Install an automatic shutoff system if it is available and a worthwhile discount is awarded by your insurance company, or if you travel frequently and don’t want leaks to occur while you are gone.
- Make sure you know if you qualify for a discount before or immediately after installation because you don’t want to end up missing out on all the savings you’ve already made.
A typical four to six point sensor setup can easily cost $100 to $250 total, and is a small portion of the cost of a typical water damage claim.
The following are a few scenarios that can be imagined in the real world.
Numbers aren’t placed until you see the actual situation.
Suppose you’re out for what you think is a long weekend and a supply line under your kitchen sink goes pop on Saturday morning. If no one were there to detect it, you’ll only discover it when you walk through the door Monday evening, when water has soaked into the subfloor and began to work its way in under the cabinets. Having a point sensor there would have notified you on your phone, perhaps alerting a neighbor to turn off the water if you were not home and prevent damage.
Imagine that the washing machine has been leaking for weeks and you never noticed the water bill continuing to rise, or a leak behind a washing machine. The irregular pattern would have drawn the attention of a flow monitor in real time before mold could have formed behind the drywall.
Both these scenarios are not drama filled. Actually, this is what happens — most water damage doesn’t occur because of some catastrophe. It is the result of little or unnoticeable mistakes that cost you a lot of money.
Does the investment pay off or not, considering the risk?
It is helpful to do the calculations side by side. A simple point sensor system that can be bought for a few devices is $100 to $250. The total cost of a whole-home flow monitor with shutoff is in the $300-$500 range, and sometimes includes professional installation.
That comes out to about half of the average water damage claim which is around $11,000 – $12,500. But if you don’t even account for any insurance discount at all, the numbers are very convincing of the benefits of installing sensors. If you then add a premium discount of 5% to 15% on top of that, the payback period would be even shorter.
However, there’s one more thing I’d like to say. Making a water damage claim is not only deductible, but it’s a cost as well. It can tag along to your renewal too, which can result in a higher premium for a few years following the time of renewal, or make it difficult to find an affordable premium if it occurs more than one time. Doing it to avoid the claim in the first place will help you protect your wallet not just today, but also in the future.
Protecting Other Parts of a Smart, Sustainable Home
If you’re already making wise investments to protect your water, it’s likely that you are considering more upgrades to your home. There are a few coverage areas that are related that are worth a look:
- Rainwater harvesting system insurance protects against risks of rainwater harvesting systems, especially if the rainwater is collected and stored in the system on the property.
- Residential wind turbine insurance helps to bridge another coverage void found in homeowners’ policies with all of the above.
Both of these work on the same principle as leak detection – standard homeowner policies were not put together with newer home technology in mind and it is a good idea to see if the contents of your coverage keep up with the installation of newer technology.
Frequently Asked Questions
No. Discounts differ from insurance company to insurance company and by state so don’t assume that you will get a discount on a device you purchase when you assume you will be getting one.
Not always. Some carriers will be willing to give a lower discount for the point sensors, and a higher discount for a monitored whole-home system that has an automatic shutoff.
No. These devices are only useful in preventing future damage, and will only alert you in time. They will not pay for something that they won’t cover in the first place and they will not make an existing claim a covered claim.
Usually not. Most policies are only issued to provide coverage for the damages caused by accidental and sudden water. If a leak has been unnoticed for a few weeks or months, it is usually considered a maintenance problem, not a leak.
Often, yes. Even if it is not a premium discount the device can still save you from an expensive claim, and you will want to avoid any claim more than any individual premium discount, in terms of preventing your long-term premiums.
