Close this search box.

Common Questions About Water Damage Insurance Claims

Homeowners’ insurance policies are complex legal documents full of exclusions, conditions, and fine print designed to protect the interests of your insurance company and mitigate their liability.

Most of us accept the terms and conditions of our policy even when we do not fully understand them. Although this is not a good practice, we often feel we have no choice if we want insurance coverage.  

Reading through a standard HO-3 homeowners insurance policy might leave you with more questions about insurance claims than answers. You might have to jump to and from several pages covering insured events and exclusions to get a picture of your coverage.

Avner Gat, Inc. has over 17 years of experience as a public adjuster in Southern California. We specialize in water damage insurance claims.

Read on to find answers to the following common questions about water damage insurance claims:

  • Is water damage covered by insurance?
  • How much does insurance pay for water damage?
  • What repairs are covered in a water damage claim?
  • What is a water damage insurance claim list?
  • What is contents restoration?
  • What else will insurance cover?
Businessman with house and FAQ objects about insurance claims

Water damage is the second most common cause of homeowners insurance claims after wind and hail damage. According to the Insurance Information Institute, about one in 60 insured homes has a property damage claim caused by water damage or freezing each year.

Is Water Damage Covered by Insurance?

Most homeowners insurance policies typically cover water damage if the cause is sudden and accidental. 

However, here are three reasons why your insurance company may give you a hard time:

1. Insurance policies do not cover all water damage incidents.

Here are some examples:

Water entering your home through the ground or sewer

Water entering your home through the ground or sewer

Most home insurance policies limit water damage coverage to water that has not entered your home from the ground or sewer.

Note that you can obtain sewer backup coverage from most insurance companies for an additional fee.

Mold damage 

You typically only have coverage for mold damage caused by a covered event. However, if you do not do anything to prevent or mitigate mold growth, it is unlikely that your insurer will entertain your claim.

A standard HO-3 homeowners’ insurance policy will typically contain the following (or similar) wording:

We do insure for loss caused by mold, fungus, or wet rot hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure if such loss results from the accidental discharge or overflow of water or steam from within:

  1. A plumbing, heating, air conditioning, or automatic fire protection sprinkler system, or a household appliance, on the “residence premises”; or
  2. A storm drain, water, steam, or sewer pipes, off the “residence premises.”

For purposes of this provision, a plumbing system or household appliance does not include a sump, sump pump, or related equipment or a roof drain, gutter, downspout, or similar fixtures or equipment.

Flood damage

Flood water reaching half the height of a home's fence.

Standard homeowners insurance policies will not cover flood damage. If you want flood damage insurance, you need a flood-specific insurance policy.

1. The key difference between water damage and flood damage is where the water originates.

Generally, if water falls from above or originates inside your home and flows out of it, it’s water damage. If water originates outside your home and flows into it, it’s flood damage.

The Federal Emergency Management Agency (FEMA) defines flood damage as follows:

“A general and temporary condition of partial or complete inundation of 2 or more acres of normally dry land area or 2 or more properties (at least 1 of which is the policyholder’s property) from:

– Overflow of inland or tidal waters;

– Unusual and rapid accumulation or runoff of surface waters from any source; or

– Mudflow; or

Collapse or subsidence of land along the shore of a lake or a similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.”

Flooding usually occurs during natural disasters.

2. Accidents causing water damage should be sudden and accidental.

A standard homeowners insurance policy typically only covers water damage caused by a sudden and accidental covered event. Damage caused by repeated seepage and leakage is not covered.

Although the damage may appear sudden to you, your insurance company might argue it existed before you noticed it and worsened over time.

Gradual water damage encompasses normal wear and tear and is typically not covered by insurance companies.

Disputes often arise over whether it was caused by a “sudden and accidental” event or by “constant or repeated seepage or leakage of water or steam over weeks, months, years.”

Some insurers have replaced the wording “over weeks, months, years” with “over some time greater than 14 days.”

However, what if you’re away on vacation or visible signs of water damage remain hidden after a covered water damage event? 

Many insurance companies had foreseen this scenario and added wording to their insurance policies to mitigate their liability, such as:

“We do not cover any water, or the presence of water, over a period of time from any constant or repeating gradual or slow seepage, leakage, trickle, collection, infiltration or overflow of water from any source… whether known or unknown to any insured.

Based on the above clause, it doesn’t matter when you discover the water damage. The only thing that matters is when the event leading to the water damage occurred.

Note: Some insurance companies, such as American Family Insurance (AMFAM), provide optional coverage for hidden water damage. In the case of AMFAM:

“It covers the cost to repair damage done by a hidden water leak you can’t see within the walls, floors, ceilings, cabinets, beneath the floors or behind or under a home appliance.”

3. Poor or inadequate maintenance.

Man inspecting the gutters on a roof

Insurance companies expect homeowners to perform regular maintenance and fix potential problems that might cause water damage.

For example, squirrels may cause roof damage over time that can cause roof leaks. Insurance companies classify it as a maintenance issue, and homeowners insurance will not cover it.

If the condition of your roof gradually declines over time and you fail to repair or maintain it, you will most likely not be able to claim for any roof leaks.

How Much Does Insurance Pay for Water Damage?

Person being handed a check

When you file a homeowners insurance claim for a covered loss, such as water damage, the amount your insurance company pays out will typically depend on two factors, namely:

A standard homeowners insurance policy, such as an HO-3 policy, provides the following:

  • Replacement cost coverage for your home and other structures.
  • Actual cash value coverage for your personal property, awnings, carpeting, household appliances, and outdoor equipment – you will usually have the option to get an endorsement to your policy for replacement cost coverage.

For example, an HO-3 policy typically includes the following (or similar wording) under “Loss Settlement” in Section I – Conditions.

“Covered property losses are settled as follows:

Personal property – at actual cash value at the time of loss but not more than the amount required to repair or replace.”

Actual Cash Value (ACV)

Actual cash value covers the replacement cost of property minus deductions for depreciation or wear and tear. So your property is insured for its depreciated value.

How Is Actual Cash Value Calculated?

To determine an item’s actual cash value, insurance companies use the following calculation:

Step 1. The cost to replace a damaged item with the same or similar one (replacement cost).

Step 2. Subtract depreciation from the item’s replacement cost.

The amount an insurance company will deduct for depreciation is determined based on an item’s theoretical lifespan. 


Laptops typically have a five-year life expectancy for insurance purposes. Assume the laptop you bought two years ago for $1,100 is destroyed, and the replacement cost of a similar one is $1,000. Your insurance company will deduct $400 (40% of $1,000) for depreciation.

The actual cash value calculation will be as follows:

$1,000 (replacement cost) – $400 (depreciation) = $600 (actual cash value)

Note that if your deductible is $200, you will only receive a check for $400 from your insurer.

As per Investopedia, the method to calculate actual cash value for insurance purposes is different from the way accountants calculate book value in financial statements or for tax purposes:

“Accountants use the purchase price and subtract the accumulated depreciation in order to value the item on a balance sheet. ACV uses the current replacement cost of a new item.”

In addition, your accountant may have a different opinion from your insurance company on the lifespan of an item.

For example, the IRS generally allows for a residential roof to be depreciated over 27.5 years. However, insurance companies typically give a residential roof a lifespan of only 20 years.

Replacement Cost Value (RCV)

Replacement cost value covers the replacement cost of property without subtracting anything for depreciation or wear and tear. Thus, your property is insured based on its replacement value.

If the laptop you bought two years ago for $1,100 is destroyed, and the replacement cost of a similar one is $1,000, your insurance company will pay you $1,000 less your deductible. They will not deduct $400 (40% of $1,000) for depreciation based on a typical five-year life expectancy for laptops.

However, it’s unlikely you will receive one check for $1,000 minus your deductible.

You will typically receive two checks, as follows:

Check 1 is for the actual cash value of your laptop.

The actual cash value calculation will be as follows:

$1,000 (replacement cost) – $400 (depreciation) = $600 (actual cash value)

If you have a $200 deductible, your check will be for $400.

Check 2 is for recoverable depreciation.

Recoverable depreciation is the difference between the replacement cost and the actual cash value of your property.

You will only receive your second check once you buy your new laptop. And you typically have to send proof of the amount you paid to your insurance company.

Assuming you paid $1,000, your insurance company will send you a check for $400.

Calculation: $1,000 replacement cost minus $600 for actual cash value.

Note that if you can find the laptop on special for $900, your second check will be $300. You cannot pocket the difference if you pay less for an item than what your insurance company agreed to pay you.

If you can’t prove you have replaced the insured property, you will only be reimbursed for the actual cash value of your property.

If you have an actual cash value policy, the depreciated value over time is non-recoverable.

Coverage on Valuables

Money and jewelry on a table

Valuables include high-value or rare items, such as jewelry, watches, and silverware. They are personal property items under “Coverage C – Personal Property” in a standard HO-3 policy with “special limits of liability.”

For example, you have a special limit of only $200 for money. If you lose $5,000 in cash due to water damage, your insurer will only pay you up to $200 minus your deductible. That leaves you with a massive loss!

Special Limits of Liability

A standard HO-3 homeowners insurance policy includes a “special limits of liability” (or similar wording) section under personal property coverage.

Special limits of liability per category might include:

  • $200 for money, banknotes, gold, silver, and coins
  • $1,500 for securities, deeds, personal records, letters of credit, and passports, including the cost to research, replace, or restore the information
  • $1,500 on watercraft of all types
  • $1,500 on trailers or semi-trailers
  • $1,500 for loss by theft of jewelry, watches, furs, precious and semiprecious stones
  • $2,500 for loss by theft of firearms 
  • $2,500 for loss by theft of silverware and silver-plated ware

Refer to your homeowners insurance policy for the limits that apply to you, as they might differ from the above ones.

What Repairs Are Covered in a Water Damage Claim?

In principle, depending on your coverage and limits, your insurance company should restore damaged items or structures to their pre-loss condition. However, it is unlikely that your insurer will agree to replace anything if it is cheaper to repair.

But this may be easier said than done. 

For example, if your damaged hardwood floors are beyond repair, your insurer can replace them with identical or similar flooring. But what if only a minor percentage of your flooring is damaged, and you cannot find identical or matching flooring? Will your insurer replace the whole floor?

The line of sight rule says everything within your line of sight should have a reasonably uniform and consistent appearance. If you can’t find a suitably matching replacement, the whole area in the line of sight must get replaced.

In California, under the Fair Claims Settlement Practices Regulations, Section § 2695.9 states:

“When a residential or commercial property insurance policy provides for the adjustment and settlement of first party losses based on replacement cost, the following standards apply:

When a loss requires replacement of items and the replaced items do not match in quality, color or size, the insurer shall replace all items in the damaged area so as to conform to a reasonably uniform appearance.”

What Is a Water Damage Insurance Claim List?

A water damage insurance claim list details the damages you suffered in a covered water damage event. It typically accompanies a proof of loss form or proof of loss declaration (notarized, sworn statement).

When it comes to homeowners insurance, the burden of proof falls upon the homeowner – your insurance provider requires you to present evidence of your loss for a covered event that leads to an insurance claim.

You can usually find the information your insurer requires in your homeowners insurance policy under “Duties After a Loss” (or similar wording).

It will typically include the following:

  • Policy number
  • Date and cause of the damage
  • Parties with a financial interest in the claim, such as your mortgage holder
  • Evidence of the loss – photos, receipts, etc.
  • Replacement value of items damaged or destroyed
  • Estimates to repair damage caused to the property
  • Documents to support the amount claimed

The documents you submit will help you to substantiate the damages you suffered after an insured event. Your insurance company uses this information, in conjunction with your insurance policy, to determine their liability.

Tip: Having a home inventory list can save you time and trouble if you have to file a water damage insurance claim. 

In principle, your list should include as many details as possible about an item, such as:

  • Description of the item
  • Make, model, and serial number (if applicable)
  • Date and place of purchase
  • Purchase price
  • Estimated replacement cost

What Is Contents Restoration?

Woman sanding down a wooden chair for her restoration project

Contents restoration companies specialize in content restoration, pack-outs, and damage assessment after a water damage event. Their goal is to restore your belongings to pre-water damage conditions. 

They frequently take items to another location for restoration work and provide complete pack-out services. It includes carefully documenting, packing, and removing contents from your home.

They can recover and restore a wide range of personal items, including:

  • Electronics
  • Rugs
  • Furniture
  • Art
  • Books
  • Clothing
  • Bedding
  • Photos

The contents restoration services they provide typically include the following:

  • Deodorization and odor removal
  • Specialized drying chambers
  • Furniture cleaning and restoration
  • Moving items to a temporary residence
  • Ultrasonic cleaning
  • Digital inventory of salvageable and non-salvageable property
  • Pack out and pack back
  • Dry cleaning
  • Short-term or long-term storage

What Else Will Insurance Cover?

Woman doing finances: holding money and using a calculator

Besides covering damages to your home and personal belongings, homeowners insurance also covers additional living expenses if it is not safe or possible for you to stay in your home after a covered water damage event.

It allows you to maintain your standard of living while repairs and restoration work are done to your home.

An HO-3 homeowners insurance policy will typically include the following (or similar wording) under “Loss Of Use” in Section I – Property Coverages:

Additional Living Expense

“If a loss covered under Section I makes that part of the “residence premises” where you reside not fit to live in, we cover any necessary increase in living expenses incurred by you so that your household can maintain its normal standard of living.
Payment will be for the shortest time required to repair or replace the damage or, if you permanently relocate, the shortest time required for your household to settle elsewhere.”

The most important phrases in the above clause are:

  • not fit to live in
  • necessary increase in living expenses incurred
  • normal standard of living

“Not Fit to Live In”

The phrase is not defined in the policy, which leaves it open to interpretation. However, in principle, we can assume that if your home suffers water damage and living in it might compromise your health, safety, or security, then it’s not fit to live in.

“Necessary Increase in Living Expenses Incurred”

As the term implies, ALE coverage is for additional expenses, not pre-existing expenses. It only covers expenses you wouldn’t have had to incur if you could continue living in your house after a covered event.

A good question to ask yourself is:

Is this an expense I incurred because of the loss event?

If the answer is yes, it’s probably reasonable for you to expect your insurer to reimburse you within reason.

Note that although staying in a hotel might be necessary, your insurance company might not agree that it’s necessary to stay in a five-star hotel. Ask your insurer what they consider to be reasonable and get it in writing.

In addition, additional living expense insurance cover is for the necessary increase in living expenses incurred. It reimburses you the difference between your regular living expenses before a covered loss and your living expenses after a covered loss.

For example, let’s assume you usually spend about $200 on gas each month to get to work. The hotel where you are staying is further away and you now spend $300 on gas each month.

Your ALE coverage will only reimburse you for the difference or the additional amount you spend on fuel because of the loss event. Based on our above example, they will only reimburse you the additional $100 it’s costing you to get to work.

“Normal Standard of Living”

ALE coverage helps you maintain your standard of living when your home is unfit to live in. It does not cover an increase in your standard of living.

For example, if you typically spend $400 on groceries every month, keep to that range. If you suddenly increase it to $600 because you’re buying more luxuries, don’t expect your insurer to finance the increase in your standard of living.

Remain as close as possible to the standard of living you enjoyed before the loss event.

ALE Coverage Limits

ALE coverage is typically subject to the following limits:

– 30 percent of the dwelling limit under HO-2, HO-3, and HO-5 policies (homeowners insurance)

For example, assume your ALE coverage limit is 30% of your dwelling limit. If you have $600,000 of dwelling coverage, your additional living expense coverage is $180,000 maximum.

How to Calculate Your Additional Living Expenses

The easiest way to calculate your additional living expenses is to use the following calculation:

(Current Living Expenses) – (Living Expenses Before Your Covered Loss) = ALE


Pet Boarding – You pay $50 per night to board your dog, whereas before you looked after your dog. Since it’s an additional expense you didn’t previously have to pay, you will typically receive full reimbursement from your insurer.

What Does ALE Insurance Cover?

Additional living expense cover might include but are not limited to:

  • Temporary accommodation costs
  • Laundry costs
  • Storage fees
  • Moving or displacement costs
  • Pet boarding
  • Restaurant meals
  • Increased mileage or transportation costs
  • Furniture rentals
  • Internet and computer setup fees
  • Cleaning expenses moving in and out of rental home

How ALE Payments Are Made

Insurers will typically reimburse you by check for additional living expenses as and when you submit your claim.

If you don’t have sufficient funds to pay for additional living expenses upfront, your insurance company might be willing to give you an advance payment.

ALE Coverage in California Relating to a State of Emergency

In California, if the cause of a covered loss is declared a “state of emergency,” then insurers must offer at least 24 months of Additional Living Expenses (ALE) benefits, up to policy limits. This may be extended by an additional 12 months due to circumstances beyond your control.

California Insurance Code Section 260(b)(1) states:

In the event of a covered loss relating to a state of emergency, as defined in Section 8558 of the Government Code, coverage for additional living expenses shall be for a period of no less than 24 months from the inception of the loss, but shall be subject to other policy provisions.

An insurer shall grant an extension of up to 12 additional months, for a total of 36 months, if an insured acting in good faith and with reasonable diligence encounters a delay or delays in the reconstruction process that are the result of circumstances beyond the control of the insured.

Circumstances beyond the control of the insured include, but are not limited to, unavoidable construction permit delays, lack of necessary construction materials, and lack of available contractors to perform the necessary work. Additional extensions of six months shall be provided to policyholders for good cause.

That’s a Wrap

Water damage claims might seem straightforward until you suffer extensive water damage in a covered event. They can be some of the most complex insurance claims you might encounter.

We hope this guide has addressed some of your questions about insurance claims for water damage. However, you may still have questions regarding your unique situation that you would like answered.

Avner Gat, Inc. has 17+ years of experience as a public adjuster in Los Angeles, covering Southern California. We protect homeowners from the games and fine print that insurance companies are known for.

If you have a large or complex water damage claim and require expert assistance, our team of public adjusters stands ready to help you.

Call us at (818) 917-5256 to find out how we can assist you.