Is utility insurance worth it? Depends on who you ask

Citizens' Voice, The (Wilkes-Barre, PA)

March 04--They arrive constantly in the mail: dire warnings that your home's underground gas, water or sewer lines are your responsibility, coupled with offers to insure you against repair costs for a monthly fee.

Are they a good deal?

Experts say: "Maybe not."

Local insurance agent George Shadie, who owns his own business, homes and apartment buildings, said he refuses the coverage every year.

"It's a money maker for the utilities. Chance of a need is quite small," Shadie said. "The risk becomes higher in older homes. Settlements in our area multiply the risk but they are rare."

Another local insurance agent, Melissa Negri, said the mailings come across as "gimmicky" and she doesn't think the insurance is something many people "absolutely need."

Local gas and water providers such as UGI and Suez have partnered with HomeServe USA, a division of a British corporation with $1 billion in annual revenues worldwide, to offer the insurance plans to their customers at costs that range from $4.99 to $16 per month.

HomeServe's partnership with UGI provides coverage for gas lines as well as repair or replacement of water heaters and heating and cooling systems.

HomeServe offers Suez customers coverage for water service lines, plumbing and draining systems, sewer and sceptic service lines and repairs to water heaters and heating and cooling systems.

Neither the utilities nor HomeServe spokesman Myles Meehan would reveal how much the utilities earn from those deals.

"Each of our more than 500 partnerships with municipalities and utilities are all a little different, but have one thing in common -- a motivation by these entities to provide optional value-added services to residents or customers that meet a need many homeowners face," Meehan said in an email.

Licensed local contractors are dispatched to do the repairs as part of the coverage, with the work guaranteed for one year, he said

UGI spokesman Joe Swope said UGI developed the partnership with HomeServe because "customers indicated an interest in having access to service agreements."

"These types of contracts are entirely optional," Swope said. "This type of protection may or may not make sense for a customer based on individual needs and circumstances, similar to the purchase of other types of insurance, service contracts or extended warranties."

All terms and prices are set by HomeServe, not UGI, Swope said.

"Whether a person should consider such coverage depends on a lot of factors, including age of equipment, income, the ability to cover the cost of repairs if there is a breakdown, etc.," he said.

UGI has 700,000 gas and electric customers in Pennsylvania and Maryland.

Steve Goudsmith, spokesman for Suez, said many homeowners often do not realize they are responsible for the service lines on their properties and repairs, if needed, could cost $3,000 to $10,000.

"It can be quite costly to repair those if they should break due to age or tree intrusion," Goudsmith said. "It can be a significant cost to the homeowner."

Goudsmith said it's a "personal preference" if customers want to sign up for HomeServe coverage but he said those who do can save a significant amount of money.

He said HomeServe saved Suez customers nationwide about $6 million in repair costs in 2017. The company provides water and wastewater services to 7.5 million people in North America.

Another local water provider, American Water, offers similar insurance and service contracts through its own subsidiary, American Water Resources.

Joseph Szafran, external affairs manager for American Water, said the contracts have saved homeowners more than $224 million in claim costs over the last five years. The company provides water and wastewater services to 15 million people in North America.

Many homeowners are unaware of their responsibilities when it comes to water line repairs, Szafran said.

"Most believe the repairs are the responsibility of their water service provider and/or their municipality, and many believe it is within the coverage of their homeowners insurance," he said in an email. "These repairs are actually the responsibility of the homeowner and oftentimes, they are not covered by homeowners insurance policies."

Pennsylvania Acting Consumer Advocate Tanya J. McCloskey said it's difficult to advise every homeowner about what's right for them. She suggests they gather information to weigh the costs and benefits of the programs.

First, she suggests they check who owns the service line and who is responsible for repairs.

She also recommends contacting their homeowners insurance providers to see whether or not service lines are covered or if they offer any supplement to cover the cost.

She said homeowners could do a survey of plumbers and contractors to find out how much it would cost to replace the lines in the worst-case scenario and if it would be better to set money aside for that rather than paying for insurance on a monthly basis.

"We try to get folks to do their homework because it's a significant monthly cost for some of these programs to consider and they should have all the necessary information," McCloskey said.

Ronald Ruman, spokesman for the Pennsylvania Insurance Department, said he could not give advice as to whether or not homeowners should purchase coverage.

"We can say that some insurance companies offer similar coverage on an optional basis for an additional charge," Ruman said. "Our advice would be to compare the terms, conditions and charges if you are thinking about this coverage."

Contact the writer:

[email protected]

570-821-2115, @CVAllabaugh

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