Water- and sewer-line insurance for business: Do you need it?

Of all the misfortunes that can befall a small business, a water or sewer backup is one of the most dreaded. Aside from the yuck factor, water or sewer problems can cause expensive damage that’s hard to fix; it can also pose health risks to tenants, customers and employees.

Unfortunately, water backups are also one of the hardest risks to predict due to their underground origins. That’s why many property insurance policies specifically exclude water and sewer backup coverage-— and why you should seriously consider adding water- and sewer-line insurance for your business.

Here’s what you need to know.

What is water- and sewer-line insurance for business?

Water- and sewer-line insurance, sometimes referred to as “water backup coverage” or “water and sewer,” helps cover your business property from damage caused by water that backs up from a sewer, drain or sump pump. It’s typically added as an endorsement to a business’s existing property policy, as water and sewer backups are specifically excluded from standard property coverage forms. Check with your local independent agent for more information.

Water backups can be caused by a variety of reasons. Common ones include:

• Tree roots burrowing into older water or sewer lines in search of water.
• Failed sump pumps.
• Damaged pipes or mains.
• Grease, paper or other substances that build up and clog sewer lines.
• Illegal plumbing connections in a building (such as a sump pump connected to a sanitary sewer).

In the event your business suffers water in the basement, your water and sewer policy could help pay for clean up and disinfection of your space, along with the tear out and replacement of materials like carpeting and drywall. Those costs may be covered up to your endorsement limit; your policy may also have an aggregate limit, setting a total cap if you have multiple claims (another topic you’ll want to chat with your independent agent about).

Note that water backup coverage does not cover the cost of repairing or replacing the sewer, drain or sump pump that caused the problem. If the problem was caused by a clog in a municipal sewer main, you may be able to make a claim with your city, but many issues are caused within a building’s own sewer system.

What is excluded from water- and sewer-line insurance?

Flood water: Most water and sewer policies exclude backups caused by tidal surges or flooding, along with water that seeps in through foundation walls. If your business has flood insurance (something to strongly consider), that policy would likely cover this kind of water damage occurring as a direct result of flood conditions.

Maintenance neglect: Water and sewer policies are really designed to help protect against sudden failures, not long-term neglect. If your insurer finds the water backup to be a result of poorly maintained equipment, illegal plumbing connections or unaddressed tree roots, for example, it may not be a covered loss.

It’s important to make sure your drainage and sewer systems are well-maintained and tested often to avoid problems down the road. Consider this a good reminder. 

Does my business really need water- and sewer-line insurance?

Any business that buys property insurance should consider buying water- and sewer-line insurance. That may sound oversimplified; you can’t assume it won’t happen to your business. For example, water damage is one of the most common small business claims we see here at UFG. 

Businesses that serve or house customers — restaurants, hotels, property managers — would be especially wise to secure water backup coverage, as the cleanup requirements and costs can add up quickly and become a detriment to business cash flow.

Water- and sewer-line insurance for businesses isn’t exactly fun or exciting to discuss, but it’s an essential part of your overall insurance strategy. Reach out to a UFG agent today to learn more about what’s covered and what’s not, and explore the options for your business.