Perhaps more than any other asset, a home represents the center of a family's financial and emotional well being. Few events are more traumatic than its destruction. Hurricanes, earthquakes, tornadoes, and wildfires grab most of the headlines for the damage they cause to homes, but day in day out, year after year, the humble water leak ranks among the worst threats. According to data from SNL and ISO, water caused $9.5 billion in annual homeowner policy property losses from 2007 to 2010 – approximately 24% of all homeowner property losses. A solid asset protection plan should guard against this prevalent foe.
In custom-built luxury homes, even a small water leak can cause a surprising amount of damage. We've seen $150,000 in damage caused in just 30 minutes. Second homes are particularly vulnerable, since the owners are less likely to be around when a leak occurs. In one case, a leak started on the top floor of a three-story vacation home and ran for weeks, essentially destroying half the home.
Homeowners insurance will typically cover the cost of repairs minus any deductible, but there's no recourse for the disruption caused by lengthy repairs. Construction after major damage often lasts six months or more. The family may be forced to live elsewhere, perhaps stretching commutes to work and school. Moreover, wealthy clients are likely to have valuable collections of art, antiques, or other precious objects that could be irreparably damaged by a leak.
Fortunately, unlike natural disasters, preventing costly damage from water leaks falls largely within the homeowner's control. Alarm systems now exist that can automatically detect leaks, shut off the water supply, and notify a central monitoring service.These systems can prevent or minimize up to 93% of the cost of water damage, according to an ACE study of damage sustained by affluent homeowners.
