By Marilyn Kennedy Melia
Chicago Tribune
Published June 13, 2004

Rain gauges in the Chicago area have been overflowing this spring. And each new inch of water soaks more homeowners with costly damage.

Fortunately, insurance sometimes pays for the loss. But, what determines when they'll pay and won't? Here are some scenarios:

Damage that stems from a specific malfunction rather than general soggy conditions is more likely to be covered.

When water invades basements, soaking floors and all that isn't lifted off the ground, the cause is likely to be a power outage causing sump-pump failure, back-up from sewers swollen by storm water or leaks through the foundation, says Ed Bowman, president of the Stewart Keator Kessberger & Lederer insurance agency in Burr Ridge.

For either of the first two causes, owners can recover only if they've paid for a sewer back-up endorsement on their policy, Bowman says.

Adding this endorsement to a homeowner policy can cost from $30 to more than $200 annually, estimates Dennis Garrett, executive vice president of the Professional Independent Insurance Agents of Illinois, a trade group in Springfield. "Cost depends on the company and how much coverage they give under this [endorsement]," Garrett says. "Some give $5,000, while some might have much higher coverage."

Lately, companies have clamped down on their claims procedures in this area, Garrett adds. For instance, they're more likely to send an adjuster to investigate whether a sump pump failed in a storm or was already non-operational and should have been replaced, he explains.

When water simply seeps in, it's unlikely a homeowner policy will cover any resulting damage, agents say.

Typically, there's one key question that determines whether homeowner insurance kicks in: Does the damage stem from one event or is it the result of ordinary wear and tear?

Seepage through a foundation usually isn't covered, agents say, because insurers put the problem in the wear and tear category.

- You may get money now, but filing some claims can cost you more later.

Even if your insurer will pay, it may not be worthwhile to file a claim if the dollar loss is relatively small, asserts Robert Hunter, director of insurance at the Consumer Federation of America, an advocacy group in Washington, D.C.

With water damage claims on your record, your premiums may rise, and there's a chance the insurance company will not want to keep you as a customer, Hunter says.

Insurance firms have been especially concerned with eliminating customers they deemed unprofitable, but that focus has eased recently, Hunter says.

Still, if the damage totals just a couple of hundred dollars more than the deductible, homeowners may be better off footing the whole bill themselves, Hunter says.

Your agent should be familiar with the underwriting policies of the insurer, and provide guidance on whether premiums might rise or whether you're in danger of non-renewal by filing a claim, Bowman says.

- Your question may be taken too seriously.

Before you ask an agent about coverage, ask if just asking could damage your record.

A few insurers have inputted questions from customers -- even when those queries didn't result in paid claims -- into a nationwide database insurance companies use to share information, says Chuck Jones, spokesman for ChoicePoint Inc., a firm in Alpharetta, Ga., that administers the C.L.U.E. (comprehensive loss underwriting exchange) database.

ChoicePoint now discourages firms from reporting simple inquiries, Jones says.

Still, an agent can pose a question on coverage without naming a specific customer, says Bowman. "They'll always give you a disclaimer that each claim is handled on an individual basis. But they'll say, `Based on what you told me, here is the answer,'" he says.

- A flood is a complete disaster for owners without government-sponsored insurance.

When rising waters flood adjacent properties, only federal insurance will help pay for losses. If you've bought a house in a designated high-risk flood zone, a lender will require you have flood insurance.

However, anyone can elect to buy coverage, even when they're in a low- or moderate-risk zone. The average charge is about $400 annually, according to a spokesman for the Federal Emergency Management Agency. Though it is government-sponsored, many insurance agents sell the coverage. More information is on the Web site, www. fema.gov.

Copyright 2004, Chicago Tribune

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