Consumer Groups Criticize Water-Sewer Lines Plans

Consumer Groups Criticize Water-Sewer Lines Plans

February 22, 2021 0 By administrator

Homeowners are often surprised to learn that damage to the underground water-sewer lines connecting their homes to service isn’t always covered by their municipality or by their homeowners insurance. But a new report on private service-line warranties—increasingly marketed as a solution—contends that these plans confuse consumers and may be largely unnecessary.

Key Takeaways

  • Water-sewer line warranties cover damage to underground pipes in a homeowner’s yard.
  • Consumer advocates say they’re concerned about how these plans are marketed and question how necessary they are.
  • Standard homeowners insurance policies typically don’t cover exterior supply line repair, but a service-line rider may be available as added coverage for a small premium—without the need for a separate warranty.

How Service Line Warranties Work

Consumers’ Checkbook, a Washington-based nonprofit consumer advocacy organization, recently examined the scope and value of utility companies’ partnerships with third-party water and sewer warranty providers nationwide. It found that more than 7 million U.S. homeowners have purchased these warranties, often assuming their local public utility either directly offered or endorsed them.

While in most cases they’re not selling a regulated insurance product, service line warranty providers aim to help cover an insurance gap that exists between your home and the nearest water main. If the water main breaks, your city is responsible for fixing it. But you’ll often be responsible for repair or replacement of the supply line connected to your house—unless your homeowners policy includes a special endorsement to cover such loss.

Market leaders in the service line space are American Water Resources (AWR) and HomeServe USA, which sell standalone warranties covering water and sewer line failure and repairs. They promise to use plumbers, contractors, and technicians familiar with local codes, and schedule and complete the work.

Of 54,000 water systems in the U.S., Consumers’ Checkbook found that 1,300 currently partner with AWR or HomeServe. But deals between utilities and warranty services are becoming more widespread, the report noted, and include major municipalities like New York City, Orlando, and San Francisco. 

The National League of Cities also endorses a service line warranty program through a partnership with HomeServe that counts more than 650 cities and towns as participants, according to its website.

In exchange for lending their names and logos, utilities that sign on to help market these warranties get a share of the premiums collected.

AWR and HomeServe say they’re providing protection for problems that could cost thousands of dollars to fix and filling a need that municipalities and utility companies can’t provide.

In a statement to Investopedia, a HomeServe spokesperson says the company believes the Consumers’ Checkbook report “ignored…

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