Mold Damage and Home Insurance
Mold damage can be extensive, but standard home insurance rarely provides coverage for it.
Mold is very common in homes. Under normal circumstances, it's not an issue. However, when it's toxic or abundant, it can become a nightmare.
Mold remediation is expensive, and some homeowners are disappointed to discover that their insurance won’t cover the cost of rectifying the problem. So, today we're going to shine a spotlight on mold problems and how home insurance policies typically treat them (see 10 Things to Know About Home Insurance to learn more about your policy).
Where There Is Mold, There Is Moisture
Mold needs moisture to grow. That why you’ll often see small amounts of black mold growing in damp areas such as a bathroom. It’s usually easily cleaned away and harmless. But undetected moisture or moisture problems can lead to widespread growth and damage to your home. On top of that, some molds lead to health issues, although this is rare.
Humidity caused by cooking, bathing, washing, and breathing can create an environment ripe for mold growth if your home doesn't have proper ventilation. Mold may grow behind walls and under flooring if your home has:
- A leaky roof
- A leaky toilet, dishwasher, or washing machine
- A failed water heater
- Failed plumbing drains
- Failed plumbing supply systems
It may also grow if your basement or crawl space flooded and you did not take proper steps to remedy the damage.
Policy Type and Exclusions
So, if you discover mold damage in your home that can't just be cleaned with disinfectant and a good scrub, is it time to file an insurance claim? The answer will depend on the details of your home insurance policy. Your policy's language will determine whether your insurer will cover mold-related damages and mold eradication procedures (if you can't decipher your policy, discuss mold protection with your insurance agent).
Generally, a standard homeowner’s policy covers claims for sudden, accidental water-related damage caused by wind driven rain, burst pipes, ice dams on the roof, and other similar events (learn more in 5 Water Damage Home Insurance Scenarios: Are You Covered?).
However, your policy does not cover all water-related damage. The Insurance Information Institute reports that every state except Arkansas, New York, North Carolina, and Virginia can limit coverage unless the mold results from a "specified peril" listed on the homeowner’s policy.
Not surprisingly, these policies exclude mold damage caused by poor maintenance, such as:
- Existing dry or wet rot
They may also exclude coverage for issues such as damage from:
- Poor workmanship
- Defective materials
And then there are companies that exclude mold completely.
Flooding is not covered under a standard homeowner’s policy, so that means that any mold damage resulting from flooding is also excluded. Luckily, flood insurance through the National Flood Insurance Program (NFIP) can compensate you for damage caused by mold and mildew after a flood. It is highly recommended, even in many areas not traditionally considered flood-prone (see The Seas Are Rising - Do You Need Flood Insurance? to find out why).
The NFIP estimates the average cost of a claim after flood waters of 2 inches is $26,892, but claims increased by 156% in 2016, according to a recent LexisNexis Home Trends Report. Weather-related water losses were the only claim category that saw such a dramatic rise.
Mold Remediation Costs
Mold claims fall under water damage in a standard homeowner’s policy, so it’s difficult to estimate the true cost. Statistics from the Insurance Information Institute estimate that the average water damage claim costs $8,861, but this can include anything from repairing damage from a burst pipe to replacing a roof. Eliminating mold can be more complex and costly.
Mold remediation is not a simple clean-up operation. It may require:
- Testing for toxicity
- HEPA-filetered fans and air movers
- Air scrubbers
- Biocides to eliminate spores
You may not be able to stay in your home when the work’s done either, due to air contamination. In this case, post-testing is also required and there might also be costs associated with relocating temporarily until it's safe to return.
Policy Limitations and Endorsements
Some homeowner’s policies provide fungi coverage, which might compensate you for mold remediation and repairs, but they usually limit the coverage to between $1,000 and $5,000.
If you don't have mold coverage, some insurers now offer a "Limited Fungi, Wet or Dry Rot, or Bacteria Coverage” endorsement. A typical endorsement starts with a $5,000 limit, but you buy $10,000, $25,000 and $50,000 coverage in some states. Premiums vary based on your location, home value, and the age of the home. Newer homes are less susceptible to water and mold due to construction techniques and materials and garner lower rates. These riders cost between $500 and $1,500 annually, with the highest rates in humid Southern states such as Texas and California.
If your current carrier will not provide an endorsement, you can purchase coverage from specialty companies that sell stand-alone policies. But be warned that these are very costly. Still, if you live in a mold-prone area or own an expensive home, it might be worth the expense.
Whether you're insured or not, you will want to take steps to avoid mold damage. The best way to protect your home against mold is to control the humidity levels in it. IRMI recommends:
- Maintaining a 30 to 50% humidity range in your home
- Ventilation in the bathroom, attic, and crawlspace
- Exhaust fans wherever an appliance creates moisture
- Proper insulation to reduce condensation
You should also make sure to perform regular maintenance tasks:
- Routinely check pipes, drain lines, hoses, facets, and appliances (repair any problem immediately)
- Maintain gutters and downspouts, and make sure the grade slopes away from your house
- Turn your water valve off while away on vacation
- Keep an eye on your water bill to spot unusual usage
Insuring After a Mold Claim
A CLUE report is an accumulation of all the insurance data on your home. It lets buyers and insurers know about potential issues, including mold. It is very important you add a note to your CLUE report if you file a mold claim explaining that you’ve remedied the problem (learn more in CLUE Yourself In: How Your Claims History Informs Your Insurance Future).
Unfortunately, because of the increased risk associated with a mold claim, some insurers may drop you or raise your premiums. Others may still insure you but insist on a higher deductible (see An Overview of Insurance Deductibles to find out what this means for you).
Keep Mold Under Control
It's important to take measures to prevent the spread of mold and the associated costs and complexities that come along with it. If you're like most people, your home is your largest asset, so it's well worth this extra care and attention, especially if you don't have adequate insurance coverage.