A couple of months ago, I received a notice from my local water provider. The notice was identified as an “Important Responsibility Message” with a requested response in 30 days. Then a month or so ago, I received a second notice and then just recently a third notice came that pushed the same information. The repeated notices really caught my attention!
The notices offered an optional water service line coverage with a 3rd party company that partnered directly with my water company. The notice outlined a $7,000 annual coverage for repairs and service calls. It also mentioned that the average cost to replace a water service line was only $2,600.
Then I learned something really important! The water line on a property belongs to the homeowner meaning any repairs are the homeowners responsibility. Once the water line reaches public property (typically the street), it then falls under the responsibility of the city or county.
Which made me wonder, how often do water lines really need to be replaced?
So, I did some research. According to HomeAdvisor.com, water main service lines last 50 years or even longer depending on the material. They also recommended an inspection every few years to just to check on the integrity of the line. Once every 50 years or so isn’t that bad!
It typically takes a full day to complete necessary repairs and would likely cost more on weekends and holidays. Here is a simple cost breakdown of repairs.
| Water Line Issue | Average Repair Cost |
|---|---|
| Shut-Off Valve Repair | $150 – $500 |
| Cracked or Leaking Pipe | $400 – $2,000 |
| Broken or Corroded Pipe | $500 – $5,000 |
The marketed coverage offered an annual $7,000 to cover expenses. It broke down a monthly rate for this service as $5.99 a month with 50% off the first year making it $2.99 for the first 12 months. Now remember, a line can last for more than 50 years. The cost to repair a broken pipe is $2,600 on average. The cost for 50 years of coverage is $3,558.
| Coverage Cost | Time Frame |
|---|---|
| $5.99 (1st year only $2.99) | Monthly |
| $35.88 | 1 Year |
| $682.80 | 10 Years |
| $1,761.00 | 25 Years |
| $3,558.00 | 50 Years |
Could this coverage be beneficial to have? Yes, depending on the homeowners financial situation. If the household is heavily in debt or does not have an established emergency fund this could be a good alternative until a budget allows for the emergency fund to be built up and debts to be paid off.
Am I planning on getting the coverage? No, and here’s why…. The monthly coverage cost invested in the stock market with just an average 4% return could lead to an additional $7,625 in those same 50 years. (The average stock market return is 6% or 7% annually) Then you factor in the money saved by not purchasing the coverage and that jumps to $11,183. Subtract the average repair cost (once in 50 years) and that leaves a gain of $8,583.
| Coverage Cost | Time Frame | Investment Return |
|---|---|---|
| $35.88 | 1 Year | $1.46 |
| $682.80 | 10 Years | $147.84 |
| $1,761.00 | 25 Years | $1,225.10 |
| $3,558.00 | 50 Years | $7,625.20 |
With a healthy emergency fund in place, there really isn’t a need to have the water service line coverage. You could invest the same amount of money and see enough of a return to cover any service and repair costs. So, depending on your own financial situation you can make the choice that is the best for you!
Resources:
https://www.homeadvisor.com/cost/plumbing/repair-a-water-main/
https://www.fixr.com/costs/water-main-repair
© EuduringFinances, 2021. All Rights Reserved.
Related Posts –
