Exterior Water Service Line Coverage: Do You Need It?

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Have you received a warning letter in the mail that your “underground water service line could fail without warning” and are not sure what direction to go in?

The letter may warn that the recipient is “responsible for the full cost of maintaining and repairing your exterior water line”.  In bold letters on the top of the letter alarmingly reads “Important Information Regarding Your Water Service Line”.  Enclosed is a payment form (asking for $4.49/month or $53.88/year) and a postage-paid return envelope to a random PO Box.

I recently received one of these letters, so I decided to explore further.  Should we be alarmed?

Overview

What is a exterior water service line?

It is a line buried underground your property that brings fresh tap water into your home.

What causes a water line to burst / need repairs?

Simply the age of the service line or changing soil conditions are usually the main culprits.   A tree root may also get tangled up in the line, causing damages.

Whose responsibility is it to fix?

Many are unaware, but exterior water service line repair or replacement is the responsibility of the homeowner.

What is covered (and not) in the policy?

Coverage includes the following:

  • No bills for covered repairs to locate, fix, and replace service line
  • Priority Service calls – 24 hour, 365 day a year emergency hot-line
  • 30 day money-back guarantee
  • One year covered repair guarantee

What isn’t covered:

  • Accident or negligence caused by you or others
  • A line that branches off the main line
  • Pre-existing damage
  • Relocation of water lines
  • Lines improperly installed by someone else

So is this a scam?

Although there are red flags, it doesn’t look to be a scam (whether it’s worth purchasing is another story).  The company who handles the coverage, HomeServe, appears to be a legit company with millions of customers throughout the US.  It currently has an A- rating from the Better Business Bureau.

HomeServe states the following:

“These mailers are not intended to alarm homeowners, but to inform them of services that have been an enormous help for tens of thousands of homeowners”

You will see many complaints about HomeServe as well, although many of these are in regards to the actual letter (which can be confused for a bill).

Is this coverage needed?

It can be a tough call whether or not to purchase the coverage.

My research suggests that water lines don’t go all that often (it is rare for damage to occur to them).  HomeServe’s own data has suggested that “exterior water pipe failure occurs in less than 1 percent of American households every year”.

However, on the other hand, it might give you peace of mind in the event something does happen.

Keep in mind, Investopedia lists this coverage in their “15 Insurance Policies You Don’t Need” article:

7. Water Line Coverage
Water companies have made an aggressive push to sell policies that cover the repair of the water line that runs from the street to your house. The odds are in your favor that you will never use this coverage, particularly if you live in a newer home. If you live an average suburban neighborhood and you do need to repair the water line, the distance to the street is short, the likelihood of a problem is low and repair costs are a few thousand dollars or less. The same goes for policies offered by other utility companies.

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The Bottom Line

Read the fine print!

Also, it is best to consult with your insurance agent before making any decisions (you may even be covered already).

The Better Business Bureau recommends to take the following into consideration:

  • The age of your house
  • Your neighbors past experience with their water and/or sewer service lines

The wisest thing may be to start an emergency savings fund or self-insure (set aside a certain amount of money).  Deposit the money you would otherwise send to HomeServe or an insurance company into a savings account.

Overall, just remember: the coverage is optional, no matter how the letter reads.

Resources

http://www.bbb.org/blog/2011/12/to-buy-or-not-to-buy-says-carol/

http://www.investopedia.com/articles/pf/07/cutpolicies.asp

http://www.mercurynews.com/ci_23379477/herhold-examine-that-water-pipe-insurance-pitch-carefully

http://www.azcentral.com/12news/consumer/articles/2012/05/14/20120514Water-Service-Line-Warranties-05152012.html#ixzz3xWOcLIAO

http://www.cincinnati.com/story/news/your-watchdog/consumer/2014/07/25/scam-scam-bill-like-mailings-skate-line/13179099/

http://www.jsonline.com/watchdog/pi/warnings-sounded-over-offer-of-water-line-insurance-b9946893z1-214224691.html

http://www.registerstar.com/news/article_9da90144-eee0-5a84-a682-d93156787588.html

 

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