Sewer Lateral Insurance vs Self-Insure Calculator
Why this decision matters
A sewer lateral is the buried pipe that carries wastewater from your home to the municipal sewer main. In many areas, the homeowner is responsible for the lateral on their property—and sometimes all the way to the tap at the main—even when the line runs beneath sidewalks, driveways, or landscaping. When the lateral fails (root intrusion, collapse, offset joints, bellies, corrosion, or crushed sections), the result can be sewage backups, emergency plumbing calls, and expensive excavation and restoration.
This calculator compares two strategies over a planning horizon:
- Buy coverage (insurance or utility warranty): pay a recurring premium and possibly a service call fee; if a failure occurs, you pay a deductible and any amount above the coverage limit.
- Self-insure: set aside money (a repair fund) and pay for failures out of pocket, optionally reducing risk with preventive maintenance like root control.
What the calculator counts as “cost”
To keep the comparison consistent, the model treats a “failure” as an event that triggers a repair or replacement significant enough to include (a) the line work and (b) typical related costs. Your total per-failure cost is modeled as:
- Replacement cost ≈ lateral length × replacement cost per foot
- Surface restoration (concrete/asphalt/landscaping, permits, etc.)
- Emergency pumping / cleanup (if relevant to your situation)
The model then applies (1) an annual failure probability, adjusted for any risk reduction from preventive maintenance, (2) construction inflation to future repair costs, and (3) discounting to express long-run costs in present-value terms.
Core formulas (expected cost approach)
1) Adjusted failure probability
If you enter an annual failure probability p and a risk reduction from root control/maintenance r, the calculator uses an adjusted probability:
2) Per-failure repair cost in year t
Let today’s per-failure cost be C0 (replacement + restoration + emergency). With construction inflation g per year, the model inflates the cost:
Ct = C0 × (1 + g)t
3) Insurance payout (simplified)
For a given per-failure cost Ct, a deductible D, a coverage limit L, and a service call fee F, a simplified covered amount is:
Covered = min(max(Ct − D, 0), L)
Your out-of-pocket on a failure with insurance is approximately:
OOPins(t) = Ct − Covered + F
4) Expected annual cost
- Self-insure (expected): Maintenance + padj × Ct
- Insurance (expected): Premium + Maintenance + padj × OOPins(t)
5) Present value over the planning horizon
With a discount rate d and horizon N years, the present value of a stream of annual expected costs is:
PV = Σt=1..N Costt / (1 + d)t
Interpreting the results
The calculator’s headline comparison is typically the present value (PV) of total expected costs over your horizon:
- If PV(Insurance) < PV(Self-insure), coverage is cheaper on average given your inputs.
- If PV(Self-insure) < PV(Insurance), saving and paying out of pocket is cheaper on average.
Also consider two practical interpretations that the PV alone can hide:
- Cash-flow risk: self-insuring may be cheaper but requires you to tolerate a large, sudden bill in a bad year.
- Policy design risk: insurance can still leave meaningful out-of-pocket exposure if limits are low or exclusions apply (e.g., restoration, cleanout access, code upgrades).
Worked example (illustrative numbers)
Assume:
- Lateral length: 60 ft
- Replacement cost per foot: $200 → base replacement = $12,000
- Surface restoration: $2,500
- Emergency pumping per failure: $600
- Total per-failure cost today: $15,100
- Annual failure probability: 3.5%
- Risk reduction from root control: 35% → adjusted probability ≈ 2.275%
- Maintenance: $120/year
- Insurance premium: $180/year
- Deductible: $500; limit: $10,000; service fee: $75
- Inflation: 5%/yr; discount rate: 3.5%/yr; horizon: 15 years
In year 1, expected self-insure cost ≈ $120 + 0.02275 × $15,100 ≈ $463/year. Expected insurance cost ≈ $180 + $120 + 0.02275 × (out-of-pocket on a failure). If a failure happens in year 1, covered amount ≈ min($15,100 − $500, $10,000) = $10,000. Out-of-pocket ≈ $15,100 − $10,000 + $75 = $5,175. Expected failure out-of-pocket ≈ 0.02275 × $5,175 ≈ $118. So expected year-1 insurance total ≈ $418/year.
Over many years, inflation increases repair costs, while discounting reduces the present weight of future costs. The PV totals you see are the model’s best estimate given these offsetting forces.
Insurance vs self-insure: quick comparison
| Factor | Buy coverage | Self-insure |
|---|---|---|
| Typical annual cash flow | Premium (predictable) | Maintenance + savings contribution (you choose) |
| Big surprise bill risk | Reduced, but not eliminated (deductible/limit/exclusions) | Higher unless reserve is well-funded |
| Best when… | Failure risk is meaningful and limits are high vs your likely repair cost | Failure risk is low/moderate and you can build a reserve |
| Main pitfalls | Low limits, denied claims, restoration exclusions, waiting periods | Under-saving; delaying repairs; optimism bias about probability |
Assumptions & limitations
- Expected-value model: results are averages. Real life is lumpy—zero failures or one expensive failure can dominate outcomes.
- Probability is treated as annual and independent unless you adjust inputs. The model does not automatically increase failure probability as the pipe ages.
- Policy terms vary: coverage limits, exclusions (restoration, cleanouts, tap fees, code upgrades), waiting periods, and claim processes differ by provider. Always confirm what is covered from the contract.
- Costs are estimates: excavation complexity, access, permitting, and local labor rates can change the true cost materially.
- Inflation and discount rate are user-supplied: the PV comparison is sensitive to these assumptions.
- Not financial advice: this tool helps structure a decision; it is not a guarantee of savings or coverage.
If you want more realistic inputs, use a sewer scope inspection report, local contractor quotes (open-cut vs trenchless), and any municipal guidance on typical lateral repair requirements for your street.
About the CSV download
The CSV export is useful for comparing multiple quotes (different premiums/limits/deductibles) side-by-side, sharing scenarios with a contractor, or keeping a record of your assumptions. Avoid including personal identifying information in filenames or notes if you plan to email the file.