A sensor system for sensing a moisture level of a working fluid includes a body housing a moisture indicator that changes color in the presence of moisture. The moisture indicator has a fixed position immersed in a path of fluid flow through the body. A light source is configured to transmit light through the moisture indicator to a color-sensing sensor of the sensor system. The sensor is separated from fluid flow through the system, and the system is configured to prevent external light from affecting the sensor. The moisture indicator is manually viewable where necessary. The sensor system also is configured to provide an electric signal corresponding to the color level of the moisture indicator, to generate an alarm signal with respect to a moisture level, to adjust for change in light intensity being sensed by the sensor, and to signify if the moisture indicator is damaged or has failed.