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Rising Water Damage Erodes Home Values
Sat Apr 24, 4:46 PM ET Add Business - Reuters to My Yahoo!
By Richard Chang
NEW YORK (Reuters) - Water damage is turning more and more homeowners' pipe dreams into nightmares.
As houses are built or upgraded with more bathrooms, ice makers, whirlpools and other plumbing fixtures, the same features that enhance most people's largest asset also threaten to erode it.
Often leaks -- and mold -- don't become apparent until after the new owner moves in and has no recourse except to file an insurance claim. Getting compensation of more than $5,000 can be tough because insurers may put up a fight.
"You can have just as much damage from a plumbing leak as a hurricane," said Charles De Smet, president of Raleigh, North Carolina-based FloLogic (http://www.flologic.com), which makes a water-leak detection system. "Water will go wherever it wants and will saturate the wood, walls, can short circuit electrical system. It's a formidable opponent."
The problem has grown as homes now come with dishwashers, ice makers, wet bars and multiple hot water heaters.
Then there are the washing machines on the second floor. "They are a great convenience, but now water drips into the living area instead of just the basement," said Scott Spencer, worldwide appraisal manager for Whitehouse Station, New Jersey-based Chubb Personal Insurance, a unit of Chubb Corp. (http://www.chubb.com).
Getting the insurance company to pay up can be a hassle. "One claim is too many for insurance companies," said Melinda Ballard, president of Policyholders of America (http://www.policyholdersofamerica.com). "The rule of thumb is if you have more than three losses in a five-year period, they can cancel or not renew you. It's in the contract."
Ballard founded the not-for-profit consumer advocacy group after own water damage ordeal.
"Sellers put their homes on the market with no disclosure, and the buyer inherits problem," she said. "We want to stop that vicious cycle."
In the now-classic case, Ballard and her husband bought a foreclosed 22-room mansion in 1989 that turned out to have multiple leaks and severe black mold contamination. The whole family got sick and was forced to evacuate. Farmer's Insurance Co. disputed how much it owed under its homeowners policy.
A Texas jury awarded the family a record $32 million in 2001 for damages. This was reduced to $4 million on appeal.
Even if insurance covers the damage, the homeowner may lose irreplaceable personal property. Repairs may require contractors to pump out the water, blow the house dry, replace the walls and ceilings, sand the floor, and paint -- forcing the household to stay at a hotel for days, or even months.
"The best course for a homeowner is to practice prevention instead of having to deal with significant repair costs," Ballard said.
Those costs are rising.
According to the latest data from the Insurance Services Office, claims for damage from water or frozen pipes cost insurers an average of $3,469 in 2002, up from $2,519 in 1998. This excludes the $500 to $1,000 deductible that the homeowner pays.
In 2002, such claims cost U.S. insurers $875 million, accounting for 21.4 percent of all losses under homeowners policies. This compares with $664 million, or 14.6 percent, in 1998.
To keep costs down, insurers are offering a discount on coverage for homes equipped with water safety devices.
De Smet bills the FloLogic System, which he invented and started to market three years ago, as "the circuit breaker for your home plumbing system."
A valve attached to the water main automatically shuts off if water runs uninterrupted for 30 minutes at a time -- or any other duration that the homeowner prefers. In the "away" mode, the system shuts down after 30 seconds of flow.
WaterCop (http://www.watercop.com) from St. Clair, Missouri-based DynaQuip Controls Corp. works more like a security alarm system. Wireless detectors placed by the washing machine, water heater, dishwater and other areas signal the shutoff valve to close the water main in the event of a leak.
Both systems cost about $500, plus about $150 for a certified installer from a major plumbing company.
Members of Policyholders of America can buy FloLogic for $300 (free sign-up online). The advocacy group also provides homeowners policies through a major nationwide insurer, which gives a discount for homes with the system.
Before buying a house, check for telltale signs of previous and potential water damage, Chubb's Spencer advised. These include raised or cracked molding on the door, lime deposits on the walls, and cracks or mildew on tiles.
"Determine how old the hot water heater is by looking at the first four digits of the serial number," he said. "The average life span of a water heater is seven to 10 years." (Editing by Lisa Von Ahn)
Rising Water Damage Erodes Home Values
Sat Apr 24, 4:46 PM ET Add Business - Reuters to My Yahoo!
By Richard Chang
NEW YORK (Reuters) - Water damage is turning more and more homeowners' pipe dreams into nightmares.
As houses are built or upgraded with more bathrooms, ice makers, whirlpools and other plumbing fixtures, the same features that enhance most people's largest asset also threaten to erode it.
Often leaks -- and mold -- don't become apparent until after the new owner moves in and has no recourse except to file an insurance claim. Getting compensation of more than $5,000 can be tough because insurers may put up a fight.
"You can have just as much damage from a plumbing leak as a hurricane," said Charles De Smet, president of Raleigh, North Carolina-based FloLogic (http://www.flologic.com), which makes a water-leak detection system. "Water will go wherever it wants and will saturate the wood, walls, can short circuit electrical system. It's a formidable opponent."
The problem has grown as homes now come with dishwashers, ice makers, wet bars and multiple hot water heaters.
Then there are the washing machines on the second floor. "They are a great convenience, but now water drips into the living area instead of just the basement," said Scott Spencer, worldwide appraisal manager for Whitehouse Station, New Jersey-based Chubb Personal Insurance, a unit of Chubb Corp. (http://www.chubb.com).
Getting the insurance company to pay up can be a hassle. "One claim is too many for insurance companies," said Melinda Ballard, president of Policyholders of America (http://www.policyholdersofamerica.com). "The rule of thumb is if you have more than three losses in a five-year period, they can cancel or not renew you. It's in the contract."
Ballard founded the not-for-profit consumer advocacy group after own water damage ordeal.
"Sellers put their homes on the market with no disclosure, and the buyer inherits problem," she said. "We want to stop that vicious cycle."
In the now-classic case, Ballard and her husband bought a foreclosed 22-room mansion in 1989 that turned out to have multiple leaks and severe black mold contamination. The whole family got sick and was forced to evacuate. Farmer's Insurance Co. disputed how much it owed under its homeowners policy.
A Texas jury awarded the family a record $32 million in 2001 for damages. This was reduced to $4 million on appeal.
Even if insurance covers the damage, the homeowner may lose irreplaceable personal property. Repairs may require contractors to pump out the water, blow the house dry, replace the walls and ceilings, sand the floor, and paint -- forcing the household to stay at a hotel for days, or even months.
"The best course for a homeowner is to practice prevention instead of having to deal with significant repair costs," Ballard said.
Those costs are rising.
According to the latest data from the Insurance Services Office, claims for damage from water or frozen pipes cost insurers an average of $3,469 in 2002, up from $2,519 in 1998. This excludes the $500 to $1,000 deductible that the homeowner pays.
In 2002, such claims cost U.S. insurers $875 million, accounting for 21.4 percent of all losses under homeowners policies. This compares with $664 million, or 14.6 percent, in 1998.
To keep costs down, insurers are offering a discount on coverage for homes equipped with water safety devices.
De Smet bills the FloLogic System, which he invented and started to market three years ago, as "the circuit breaker for your home plumbing system."
A valve attached to the water main automatically shuts off if water runs uninterrupted for 30 minutes at a time -- or any other duration that the homeowner prefers. In the "away" mode, the system shuts down after 30 seconds of flow.
WaterCop (http://www.watercop.com) from St. Clair, Missouri-based DynaQuip Controls Corp. works more like a security alarm system. Wireless detectors placed by the washing machine, water heater, dishwater and other areas signal the shutoff valve to close the water main in the event of a leak.
Both systems cost about $500, plus about $150 for a certified installer from a major plumbing company.
Members of Policyholders of America can buy FloLogic for $300 (free sign-up online). The advocacy group also provides homeowners policies through a major nationwide insurer, which gives a discount for homes with the system.
Before buying a house, check for telltale signs of previous and potential water damage, Chubb's Spencer advised. These include raised or cracked molding on the door, lime deposits on the walls, and cracks or mildew on tiles.
"Determine how old the hot water heater is by looking at the first four digits of the serial number," he said. "The average life span of a water heater is seven to 10 years." (Editing by Lisa Von Ahn)