Water damage and flood on a Texas rental

Short answer. On a Texas landlord policy, it depends on how the water got in. A sudden burst pipe is usually covered, though not the pipe itself. Slow leaks, drain backups and broken underground lines depend on the policy and often need an add-on. Flood needs a separate flood policy, which usually takes 30 days to start.

Texas landlords must also give tenants a written floodplain notice; see below.

Does landlord insurance cover water damage? Five ways water gets in

An endorsement is a form attached to the policy that adds or changes coverage. These are typical patterns; your declarations page (the policy's summary page) and its forms decide.

A burst pipe: the ordinary water claim

The Texas Department of Insurance (TDI) has its own standard dwelling form, the Texas Dwelling Policy Form 3 (TDP-3, last revised in 2002). Insurers may still use it, but many now use their own approved forms (Ins. Code §2301.052), and surplus-lines insurers use theirs; we quote it because it is public. It covers the building (Coverage A) on an open-perils basis: against all risks of physical loss unless the loss is excluded. So water damage to the house from a sudden burst is covered unless an exclusion applies.

The tear-out wording is in a different place. For personal property (Coverage B) the form lists named perils, and one of them is "Accidental Discharge, Leakage or Overflow of Water or Steam from within a plumbing, heating or air conditioning system or household appliance." For that peril the form adds that a loss "includes the cost of tearing out and replacing any part of the building necessary to repair or replace the system or appliance. But this does not include loss to the system or appliance from which the water or steam escaped" (TDP-3, Perils Insured Against). The building coverage has no tear-out clause of its own.

In plain terms: the soaked drywall and flooring may be covered as damage to the building. Whether opening and closing the wall to reach the pipe is paid depends on how your form words it, so ask. The split piece of pipe is usually treated as maintenance.

Some policies also cap water claims with a water damage limitation, a ceiling on what a water claim can pay. It is easy to miss on a summary page, so look for it.

Slow and hidden leaks

This is where forms differ most.

• Other filed forms. In a 2003 order (No. 03-0110) comparing one insurer's filed dwelling form with the TDP-3, TDI noted that the other form excluded losses "caused by constant or repeated seepage or leakage of water or steam over a period of weeks, months, or years," and that "the TDP-3 does not exclude coverage for water damage from constant or repeated seepage or leakage of water or steam" (TDI Order No. 03-0110). Many forms carry a seepage exclusion of that kind, and some insurers offer a limited hidden water endorsement to add a little back.
• The TDP-3. It has no exclusion for repeated seepage, but its wear and tear, deterioration and rot exclusions can still apply to a slow leak. Its mold exclusion treats a hidden leak as "sudden and accidental" until it is detectable, and requires a hidden loss to be reported "no later than 30 days after the date you detect or should have detected the loss" (TDP-3, General Exclusions).

What every form agrees on: a leak you knew about, or should have noticed, and left alone is not covered. TDI's guide lists "A continuous water leak" among things policies won't cover, and says "policies also won't cover mold removal, except to repair damage caused by a covered risk" (TDI Home insurance guide). The TDP-3 likewise covers mold that follows a covered sudden discharge but not "the cost for remediation, including testing." So report water damage as soon as you see it.

Is a slab leak or foundation damage covered?

The foundation is part of the house, but that does not make every foundation problem covered. The TDP-3 excludes loss "caused by settling, cracking, bulging, shrinkage or expansion of foundations, walls, floors," and separately excludes "earthquake, landslide or earth movement." The foundation exclusion gives back water damage that follows (ensuing water damage); the earth-movement exclusion does not (TDP-3, General Exclusions).

On the TDI form, foundation damage caused by a leaking plumbing system has been treated as covered: TDI noted in 2003 that "the TDP-3 provides dwelling foundation coverage up to the total limit of insurance for Coverage A-Dwelling." Settling or cracking not caused by a covered water loss is excluded. Many other forms exclude or cap slab-leak foundation damage; the filed form TDI reviewed in that order limited it to $15,000 by endorsement (TDI Order No. 03-0110). So what your form says decides it, and in Central Texas clay soils, where ground moves with the seasons, the difference is large.

Freezing in an empty house

The TDP-3 excludes freezing damage "while the building is unoccupied unless you have used reasonable care to: (1) maintain heat in the building; or (2) shut off the water supply and drain plumbing, heating and air conditioning systems of water." Between tenants in winter, one of those two needs to be true. See Vacant rental property insurance in Texas.

Flood: a separate policy

The TDP-3 excludes "flood, surface water, waves, tidal water or tidal waves, overflow of streams or other bodies of water." TDI says: "Most home policies don't cover damage caused by floods," and "Most flood policies have a 30-day waiting period before kicking in so don't wait for an approaching storm before deciding to buy coverage" (TDI Home insurance guide).

Flood insurance for a rental house is available from the National Flood Insurance Program (NFIP) and from private insurers. What landlords should know about an NFIP policy, from FEMA's own publications:

• Limits. For a single-family or two-to-four family building, the maximums are $250,000 for the building and $100,000 for contents (FEMA, Answers to Questions About the NFIP).
• How claims are settled. Replacement cost applies "if ... your building coverage is within 80% of the replacement cost of your home, and your home is your principal residence." Contents are "always paid based on ACV" (FEMA, NFIP Summary of Coverage). A rental you don't live in is not your principal residence, so building claims are generally settled on actual cash value (after depreciation). FEMA's Q&A says a two-to-four family building that is not the policyholder's principal residence is "always settled at ACV" (FEMA F-084).
• No lost rent. The NFIP summary lists "Financial losses caused by business interruption or loss of use of insured property" as not covered. Some private flood policies offer it, so ask.
• The wait. A new NFIP policy generally becomes effective 30 days after application and payment, with exceptions such as a policy bought in connection with a loan closing (FEMA Q&A).
• Congress sets the NFIP's authority for short periods. During a lapse, new NFIP policies can't be sold, so check with your agent.
• Risk outside mapped zones. FEMA says that "about 40% of NFIP flood insurance claims come from outside the high-risk flood zones" (FEMA F-084). To find your address's flood zone, start at the NFIP's flood zones and maps page.

If the house has a mortgage and sits in a high-risk flood zone, your lender will generally require flood insurance; see Texas rental insurance: mortgage and escrow.

The Texas floodplain notice to tenants

Since January 1, 2022, a Texas landlord must give a tenant a written notice saying whether the landlord is aware the dwelling is in a 100-year floodplain, and a second notice if the landlord knows it has flooded at least once in the past five years (Tex. Prop. Code §92.0135). The notice goes in the lease, an addendum or a separate signed document at or before signing, and does not apply to leases shorter than 30 days. If a landlord fails to give it and the tenant's belongings suffer substantial flood damage, the tenant may end the lease. The required wording also tells tenants that "Most tenant insurance policies do not cover damages or loss incurred in a flood."

When water damage happens

• Take photos first, before anything is moved or thrown away. If water is still running, a few photos take seconds.
• Then stop more damage. Shut off the water, put a tarp over any opening, and dry what you can.
• Keep every receipt for what you spend.
• Report it to your insurance company promptly. You file the claim directly with the insurance company named on your policy. In Texas, an insurer generally must acknowledge a claim within 15 days of receiving notice, or 30 business days for an eligible surplus-lines insurer (Ins. Code §542.055). The rest of the Texas claim deadlines: how long an insurer has.
• Tell your tenant what is happening. Their belongings are a matter for their renters policy. See Landlord vs renters insurance in Texas.

Questions to ask about your policy

• Is there a water damage limitation, and how much is it?
• Does the form exclude repeated seepage? Is hidden water available?
• Is water back-up included or available? Service line?
• What does the form say about foundations, slab leaks and earth movement?
• Is the house in a mapped flood zone, and is flood insurance in place?

AIV Insurance is an independent insurance agency in Texas. We don't handle claims: they are filed with and decided by the insurance company named on your policy, and we can help you find the right contact. To check how your policy treats water before anything happens, reach us through the contact page.