Property Ins. in Cleveland area does not cover burst pipes?

Question

Hi, BP.  We were just told by an insurance agent yesterday that property insurance for rentals does not cover burst pipes due to freezing in Cleveland area.  Would appreciate input on that.  That was new to us.   Thanks, all!

BreAnn Stephenson · Answer

I would agree with David here. The DP1 is also known as Basic Form. Basic typically includes the following: Fire, Lightning, Explosion, Wind/Hail (but not Named Storm/Hurricane), Smoke, Aircraft and Vehicles, Riot or Civil Commotion, Volcanic Action, Sprinkler Leakage, Sinkhole Collapse, Vandalism/Malicious Mischief.

The DP3 is also known as Special Form and that gives you coverage for any physical losses not specifically excluded in the policy. That does NOT mean it covers "everything" but it is the broadest form of coverage available. Some important coverages gained under the Special Form are Water Damage (from a burst pipe for ex.) and Theft. One should still be careful in maintaining the heat in an occupied or vacant property or properly winterizing a vacant property though. Many policies will stipulate that heat must be maintained or the water shut off and the property winterized in order to afford coverage.

Definitely work with someone who is familiar with coverage specifically for investment properties. That stated, in some areas, because of a greater risk of theft, Basic Form may be the only type of coverage available for that specific zip code. RentFax is a good tool for gathering demographic information before purchase. Buying in better areas can help you with the availability of coverages too.

Let us know how it goes!

David Terbeek · Answer

There are two basic types of insurance, the DP1 (cheaper) only covers certain risks and I don't think that would one of them.  The DP3 product should cover this type of loss unless the policy specifically excludes it.  Be sure you work with an agent that understands rental properties and can check for exclusions with whatever carrier you decide to work with.  Also, very important to specify to agent if the property is vacant because your coverage could be voided if you don't have the right product.

Michael Norris · Answer

Like others posted it depends on the type of policy you have and IF you / tenant have maintained heat in the residence. Typically No heat = No Pay on Claim.

Not all companies are the same - here is my experience as an insurance agent.

An insurance client with a basic rental property policy that had burst pipes because his furnace failed. On notice from the tenant he had a professional furnace company immediately contracted to make repairs and put space heaters in the unit to try and prevent the burst pipes. Unfortunately it happened anyway and he had significant damage.

The insurance adjuster ruled that he had made all reasonable effort to repair the furnace and prevent the burst pipes so they paid out on the claim.

Adam Diamond · Answer

Deanna - I would be happy to chat.  I'm local to the area here in Cleveland and can definitely help.

Patsy Waldron · Answer

I got an e-mail about this just today from my insurance company! I am pasting a part of their blurb about why an insurance policy may not cover burst pipes (it boils down to having the most bare-bones form of coverage, instead of a more comprehensive policy):

In the past few weeks we have seen a number of losses reported that  prior experience tells us will eventually be denied by carriers. We've  seen single losses totaling more than $30,000 and what's tough to  swallow is that many of these losses were avoidable.

What's happening & what's the danger?

• Property owners or their tenants are failing to maintain  heat in the property. An ensuing water loss caused by frozen pipes may  be denied by the carrier if the heat was not maintained, whether  occupied or vacant
• Investors are bearing the full weight of a water loss  because they have Basic Form coverage and did not protect their property  against water damage. Water Damage is excluded under the Basic Form.
• If a vacant property is neglected by a property owner or  manager, substantial mold growth may already be present by the time a  water issue is discovered. Mold is a standard exclusion in the majority  of insurance policies.

John Mocker · Answer

Deanna,

You should shop around.  Most Standard policies cover water damage due to the bursting pipe due to freezing if they are at "Special" (aka "all-risk") Form.   There are coverage forms that include less coverage; Basic (Fire, lightning, & removal), Fire & Extended coverage (adds: wind, Riot, Civil Commotion, Smoke, Hail, Aircraft/Vehicle, Explosion), to the Extended coverage is often added Vandalism & Malicious Mischief (VMM).  These lesser forms normally not cover the Water Damage.   Some companies have their own versions of the standard forms that may include the coverage.

If the pipe they are talking about is outside the house (ie. the incoming water line underground) the policy normally excludes that.   For the outside water pipe you can sometimes purchase coverage through the water company.

Casey J Burkhead · Answer

I've never heard of that.  If the property isn't occupied at the time of loss, that's a different story.  But if it's occupied with working central heat, then it should be covered on a standard Landlord Dwelling policy.  I agree with the prior two responses that you should look into getting a different policy.

Christopher Phillips · Answer

@Deanna S. It should cover burst pipes. if they don't cover it, you should get quotes from other companies.

Tyler Brown-Lewis · Answer

Never heard that. I strongly suggest you try a different your insurance company asap.

Property Ins. in Cleveland area does not cover burst pipes?

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