Should You Buy Exterior Water Service Line Coverage?

Water Line Break in Yard

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The water line insurance offer might arrive in the mail and look just like an official notice from your local water company or government agency, saying something like: "Important Information Regarding Your Water Service Line. Response Requested Within 30 Days." This mailer (or e-mail) might look so serious that most homeowners will immediately rip into the envelope.

The enclosed letter may warn you about your water service line failing without notice and resulting in financial near-ruin, since you will need to pay many thousands of dollars in unforeseen expenses. For a low monthly price, this offer says, your buried water line could be financially covered against breakage. What's happening here?

The High Price of Broken Water Service Lines

Next to having a tree fall on your house or water flood your basement while you are on a long vacation, few home-related problems are as frightening as a plumbing line breaking on your property. 

Most homeowners have seen homes with front yards torn up and maybe even experienced this themselves. The grass is obliterated because the backhoe has ripped it up. Next to the four-foot-deep trench are masses of sheet plastic covering piles of dirt. Rain fills the trenches. It is not a fast project because earthwork never is fast. Neighbors or relatives speaking about their own, related problems might quote prices well into the thousands.

Should you have a broken water service line or sewer line, this type of dialogue is legitimate. In inclement weather, repairs may be delayed. Permitting can slow down the project. Repairs are ugly, and restoration rarely returns your property back to its original state. And worst of all, it is always very expensive. Water line insurance is marketed as a way to stave off the high cost of water service line repairs.

What Is Water Line Insurance?

A water service line is the pipe that brings fresh water into the house and does not include pipes that carry away wastewater. Water line insurance, or exterior water service line coverage, is not a true insurance policy but a financial contract between a consumer and a company. Should the exterior water service line to your property fail, the company will pay your claims to repair the line, from the foundation's edge to the property line (or to the well, should you have private water service).

While contracts will vary, some common features you may find are:

  • Leaking, low pressure, or blocked lines are covered
  • Must result from normal wear and tear, not accident or negligence
  • Limited restoration work may be offered (new sod, pavers, etc.)
  • Condominiums and HOA communities not covered
  • Must use company's own technicians
  • Any lines that branch off of the main water service line are not covered

Water Line Insurance Is Not a Utilities Program

Has some sort of emergency struck your home or even the entire neighborhood? Why is your local utility company contacting you? When a water line insurance company contacts you, it is important to realize that this is a private company, not your utility company or local government agency.

To further confuse matters, some water line insurance companies engage in partnership programs with municipal water districts for unrelated matters. Some companies use this as an opening to scatter government logos on their websites and mailers. With this, it is easy to think that the company has official or at least semi-official status. Not only do the government affiliations provide more business for these companies but they give the company a greater air of legitimacy.

Water Line Insurance: Pros

Helps Your Peace of Mind

The concept of peace of mind has long been advanced by insurance companies as a selling point to consumers. Yet peace of mind is a highly unique, personal concept. What might seem to be an acceptable risk to one person may keep another person up all night with anxiety. If you are anxious about the potential of exterior water line breakage and you want to take every measure possible to protect your finances against this event, water line insurance may help with your peace of mind.

May Improve House Sale Prospects

Home repair warranties are often purchased by home sellers as one way to make the home more desirable to buyers. Warranties can help allay home buyers' fears that mechanical systems will break down soon after they have purchased the home. After laying out a large amount of cash (in the form of the down payment), most home buyers are not in a position to take on large, expensive repairs like exterior water line breakages soon after purchasing the home. Bundling water line insurance in with other home warranty components, or even offering it as a stand-alone product, may help make the home more enticing to buyers.

Homeowner's Insurance Gaps in Coverage

Homeowner's insurance typically will not cover repairs or replacement to your exterior water line. While your insurance may differ, one typical homeowner's insurance policy states that outside water pipes are not expressly excluded. However, the provision that the coverage does not apply to land, including land on which the dwelling is located, negates the possibility that water lines would be covered. In short, this policy is all about covering your home, its physical structure, and adjacent properties like garages and sheds.

Water Line Insurance: Cons

Water Line Breakage Is Rare

It is rare that a water line will break. Exterior water service lines are freeze-proof and essentially free from accidental breakage. Water service lines are buried over two feet deep and often deeper. All water supply lines are buried below the frost line. If frost is not a concern, they are still buried deep in order to stay clear of normal work a person might perform on a yard. So the question is: What might cause the supply line to break?

Water line insurance only covers water supply lines, not sewer lines. Trenches often seen in front yards usually are sewer pipes, not water supply pipes. Many sewer pipes are over a century old and are made of clay.

Contract May Contain Loopholes

The water line insurance company may offer limited coverage per occurrence. One company states that it will cover up to $6,000 in claims per year. The provision is that you cannot make a single, large claim of $6,000. Instead, it is broken up into two occurrences, at $3,000 each. What that means is that your broken water problem must cost $3,000 or less to fix; the remaining coverage events are inconsequential because they apply only to those particular occurrences and cannot be lumped together. Another loophole found in a prominent company's contract is that the homeowner cannot make a claim in the first month of the contract. The one-year contract is then only 11 months long.

You Must Use Their Technicians

Many water line insurance companies force you to use their own technicians, thus limiting the pool of available help. If the plumber is not associated with the company, that plumber's work will not be covered.