A new polarization model potential for describing the interaction of an excess electron with water clusters is presented. This model, which allows for self-consistent electron-water and water-water polarization, including dispersion interactions between the excess electron and the water monomers, gives electron binding energies in excellent agreement with high-level ab initio calculations for both surface-bound and cavity-bound states of (H2O)(n)(-) clusters. By contrast, model potentials that do not allow for a self-consistent treatment of electron-water and water-water polarization are less successful at predicting the relative stability of surface-bound and cavity-bound excess electron states.