Le dégât des eaux est un sinistre.

Both exist, but they are used a little differently.

• Le dégât des eaux can refer to the general concept or category, especially in administrative or insurance language.
• Les dégâts des eaux is also very common and often refers to actual instances or visible damage in a more concrete way.

In insurance French, dégât des eaux is a fixed expression meaning water damage or water-related damage. So the singular here is not strange: it is treating the whole thing as one type of incident.

Because eaux is the plural form of eau, and in this expression French normally uses the plural.

So:

• de + les = des
• les eaux = the waters

Even though English usually says water damage, French uses the established expression dégât des eaux. It is best learned as a set phrase.

Because the phrase is built with a plural noun: les eaux.

• de l'eau = of the water / some water with singular eau
• des eaux = contraction of de + les eaux

In this fixed expression, French does not normally say dégât de l'eau. The usual form is dégât des eaux.

Dégât usually refers to actual, concrete damage caused by something, especially to property or objects.

Dommage is broader and can mean:

• physical damage
• harm
• even a pity in expressions like C’est dommage

So in this sentence, dégât is the natural word because we are talking about a type of material damage, especially in an insurance context.

Here Le is being used generically.

French often uses the definite article to talk about a whole category or concept:

• Le chocolat est bon.
• Le vélo est pratique.

So Le dégât des eaux est un sinistre means something like:

• Water damage is an insured incident / a loss event
• or A water-damage incident is a claimable loss

English often uses no article in these generic statements, but French usually does use one.

Because sinistre here is a noun, not an adjective.

• un sinistre = an incident of loss, a claim event, a disaster, especially in insurance language
• sinistre as an adjective means gloomy, ominous, or sinister

In this sentence, est un sinistre means is a loss event / an insurance claim incident. Since it is a noun, it needs an article: un.

No, not in this sentence.

Although the words are historically related, here sinistre is a noun used in insurance and means something like:

• claim
• loss event
• insured incident

As an adjective, sinistre can mean sinister, grim, or ominous, but that is not the meaning here.

It sounds fairly formal and technical, especially because of sinistre.

You are likely to see it in:

• insurance documents
• housing reports
• administrative language
• legal or property-related contexts

In casual conversation, people might more naturally say something like:

• Il y a eu un dégât des eaux.
• On a eu des dégâts des eaux.
• Il y a une fuite et des dégâts.

So the sentence is correct, but it has a formal, classification-style tone.

Dégât is pronounced roughly like day-GAH.

A few useful points:

• é gives a clear ay sound
• â does not strongly change pronunciation in modern French, but it shows the spelling/history of the word
• the final t is normally silent

So the word is approximately day-gah.

Yes. That is the best approach.

Even if you can analyze it word by word, dégât des eaux functions as a standard set phrase in French, especially in home and insurance contexts.

It is worth learning it as one unit:

• un dégât des eaux = a case of water damage
• avoir un dégât des eaux = to have water damage
• déclarer un dégât des eaux = to report water damage

That will sound much more natural than trying to build the phrase from scratch each time.