Geyser Risk
When a geyser fails, it often causes consequential damage to underlying structures and assets due to the sudden release of water, in addition to the loss of the geyser itself.
Geyser failures are the leading cause of insurance claims in residential property insurance, significantly increasing loss ratios—and, as a result, premiums.
Scroll down to explore effective geyser risk management methods to consider.
1. Collective insurance cover on the body corporate's policy
While this is the most common practice, it seems unreasonable for insurers to take on the risk for an asset that not only poses a 100% certainty of an insurance claim but is also likely to cause consequential damage to other assets. Furthermore, it often fails to meet the typical requirement of being a sudden and unforeseen event.
Geyser insurance often feels akin to paying for an item that only benefits the insured once the existing asset has reached the end of its useful life. In this scenario, there are no clear winners.
2. The 10-year maintenance, repair and replacement plan
An often-overlooked solution is to allocate geysers to the mandatory 10-Year Maintenance, Repair, and Replacement Plan, which ensures financial provision for the planned and preventative maintenance of major capital assets.
For instance, the amount paid to an insurer for geyser risk—say R75 per 150L in-roof geyser per month—could instead be deposited into the body corporate’s interest-bearing Reserve Fund account. At an average interest rate of 7.5% p.a., the accumulated contributions would equal the cost of a new geyser after approximately eight years, aligning with the expected lifespan of an electrical mild steel geyser.
The excess amount that an insurer would typically deduct from a claim payment can also be set aside for the installation costs of a new geyser. If consequential damage proves unavoidable, this can be claimed against the unit owner’s personal insurance policy.
Advantages of geyser exclusion
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Improved claims and loss ratios for the body corporate.
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Increased cash equity in the Reserve Fund.
Exclusive benefits offered by Mono
When clients choose to exclude geysers from their insurance policies, Mono provides:
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A free 10-year maintenance, repair, and replacement plan.
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Coming soon: Discounts on smart water leak detection devices.
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Coming soon: Replacement geysers sold at wholesale prices to the body corporate.
3. Durable products, regular maintenance, early warnings
The term “burst geyser” is often used, implying an explosive rupture caused by excessive pressure. In reality, geyser failure typically occurs gradually and is attributed to factors such as:
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Corrosion.
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Incorrect installation.
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Lack of maintenance.
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Sediment build-up.
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Faulty pressure relief valves or thermostats.
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Manufacturing defects.
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Material fatigue due to age.
Although the average lifespan of a mild steel geyser is 5 - 10 years, premature failure may occur due to one or more of these factors. The following preventive measures can help extend the lifespan of a geyser and minimize consequential damage:
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Use superior-quality geysers, such as those made from stainless steel or copper.
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Schedule annual inspections by a professional.
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Replace the sacrificial anode rod regularly to prevent corrosion.
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Flush the tank periodically to remove sediment build-up.
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Test the pressure relief valve regularly to ensure proper functioning.
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Monitor the thermostat and heating element for proper operation.
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Install a smart water leak sensor for early detection.
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Replace the geyser before it reaches the end of its expected lifespan.
4. Individual insurance on homeowner's policies
While STSM Regulation 31 mandates that members must maintain, repair, and, when necessary, replace the water-heating installation (e.g., geyser or heat pump) serving their unit, this responsibility is often shifted to the body corporate.
Requiring geysers to be covered under individual homeowners’ policies would encourage property owners to prioritise regular maintenance. It would also distribute potentially high claims and loss ratios across multiple policies, rather than placing an excessive burden on the body corporate’s claims history.