What home appliance is most likely to lead to a claim on your homeowner's policy?
The newest scourge of claims activity is something insurance companies want consumers to install in their home to address flood risk, brokers tell Insurance Business. The sump pump.
"Insurance companies are asking customers to put in back-flow valves and [sump pumps] to prevent sewer back-up," said Peter Mann of at Crain & Schooley Insurance Brokers in Eastern Ontario. "They're not absolute requirements to get insurance, but that's certainly a topical area."
In Canada, water damage has now surpassed fire damage as the Number 1 reason for claims against homeowner policies. The Insurance Bureau of Canada (IBC) estimates that water damage claims cost Canadian insurers approximately $1.7 billion annually.
There is some irony, then, that the sump pump – a solution to prevent water from backing up into the basement of a policyholder's home – may now the source of claims activity itself, brokers report.
A sump pump is installed in a home when weeping tiles are disconnected from sewer laterals. It is used to pump water from the weeping tiles to the lot's surface. Its popularity is due to the increase in water insurance claims in Canada over the past decade.
How do sump pumps fail? Sump-pumps need electricity. They stop working during a power failure, and brokers are saying it is a common occurrence for their clients to install a sump pump without an electricity back-up. The homeowners will go away for a few days, and while they are gone there will be a power outage. The sump pump stops working, and the clients come back to a basement filled with water.
Brokers contacted for this story indicated that their carriers are now suggesting that a power back-up be installed to gain any premium advantage from having a sump pump installed.
"The way insurance companies are responding to [water damage] is that they will give discounts on that [sewer backup] portion on the coverage, if you have things like a battery back-up or if you have a generator back-up or if you have an alarm on your sump pump," said Mann. "Where they get a little sticky about it is if you've ever had a claim from the back-up of the sump. Then they might insist that those mitigation measures be taken in order to continue coverage."
As an aside, sump pumps are not the only major culprit in home insurance claims. What other appliance is commonly cited by brokers?
The common toaster.
The appliance is a major source of their home fire claims, brokers say.
"You'd be surprised what people put in their toasters," said Alida Battista of the claims service at Youngs Insurance Brokers. "We've seen people put hamburgers in their toaster and the liquid (from the patty) caused a fire." Another client apparently caused a fire by toasting a hot dog