Apple has updated its Knowledge Base article titled “How to verify iPhone hardware is working correctly” with information about liquid damage.
The iPhone has an indicator at the base of its headphone jack that is normally white. Apple says that if half of the dot becomes red when the iPhone has been submerged in liquid (see the Apple document for an image).
“If the dot is red (or a pinkish color), the repair is not covered by the warranty.â€
Through personal experience, I know they are not the only company that does this. I had never heard of this until I accidently dropped my phone into a lake and tried to get a replacement of my Motorola Razr.
If your iPhone does happens to suffer liquid damage, there are a few precedures you should take before handing over your wallet and they also explain how to do that. One of which is not to completely get rid of your precious iPhone 
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