Homeowners Insurance: Does it Cover Mold?

Besides the impact on your health, mold damage in your home can put a devastating dent in your wallet. 

While the average cost of mold removal is about $2,215, some projects cost up to $90,000, says executive director Doug Hoffman of the National Organization of Remediators and Mold Inspectors. 

Knowing the potential cost, you may be wondering if homeowners insurance covers mold damage. The answer depends on the situation and your insurance coverage. 

Does Home Insurance Cover Mold Damage?

Possibly. It depends on the peril or event that caused the mold in the first place and whether your policy covers it, according to Jim Hickey, head of personal lines at World Insurance Associates. Some examples of commonly covered perils are fire, lightning, wind, or hail. 

If it’s not a covered peril and it’s long-term wear and tear or a result of a damp, moist area that causes mold to occur over time, that would likely not be covered, he said. 

Insurance companies also typically have sub-limits for mold claims, even if the mold occurs because of a named peril in the policy. That can limit reimbursement to as little as $1,000 for some policies. If you want additional coverage, you can typically purchase an endorsement or rider, but it may be costly if you live in an area prone to mold damage. 

Situations when mold damage is covered by home insurance:

• An appliance malfunctions and causes a water leak that leads to mold
• A water heater bursts and causes mold damage
• There is a fire in your home, and extinguishing it results in water damage

Situations when mold damage is not covered by home insurance:

• Flooding from a storm causes mold damage
• A leak that you failed to stop gradually leads to mold damage
• Sewer backup or water seeping into your home leads to damage
• You failed to take preventative measures in a humid climate

How Much Will My Insurance Cover?

Typical insurance companies have sub-limits ranging from $1,000 to $10,000 for mold restoration. Mold damage riders can help increase your coverage limits. But if the mold occurred because of a failure to properly maintain your home, your insurance company will likely deny your claim. For example, if you live in Florida but don’t have a humidifier installed, mold development would constitute wear and tear rather than a covered peril. 

How Do I File a Claim?

1. Take photos and record details: The first time you notice the mold, document the damage with photos. 
2. Contact your insurance agent: Find out if the mold was caused by a covered peril in your policy. Also, an argument can be made if the insurance company has already approved a claim to correct water damage and the mold developed later. Request to reopen the old claim rather than filing a new one. 
3. Prevent further damage:  Do your best to prevent further mold damage, such as removing belongings from the area, run a dehumidifier, or open windows. But don’t start paying for repairs yourself until your insurance company has sent out an adjuster. 
4. Meet with a claims adjuster. A claims adjuster may do an inspection assessment and an estimate of damages. You can also hire a mold assessor for a second opinion using the NORMIpro search tool. 
5. Mold restoration: The reimbursement process will vary by insurance company. However, you’ll likely receive an advance followed by a final payment after the repairs are complete. Make sure to keep receipts from the mold restoration company or contractor you hire to take care of the issue. Your insurance company may also pay them directly. 

What to Do if Your Claim Is Denied

The first thing you should do is consider whether the insurance company may have made a mistake in denying your claim. “You always have the ability to file an appeal, either directly to the insurance carrier or the state’s department of banking and insurance, if you feel it’s a legitimate loss that’s been denied,” said Hickey. 

If you don’t have mold coverage or your appeal is denied you’ll want to hire a professional to remediate the mold before it gets worse. If you have difficulty financing mold removal that wasn’t covered by insurance, consider a home equity loan or home equity line of credit (HELOC). Some mold remediators also work with lenders to offer financing directly. And your family could qualify for state or federal loans or grants. For example, the Section 504 Home Repair program provides loans and grants to qualified low-income families.  

Finally, you should make sure that mold damage doesn’t become an issue in the future. That means making sure that you have the right coverage in place and taking proactive steps to prevent mold. It comes down to being aware of moisture, says Hoffman. Cleaning up spills right away, using exhaust fans, and maintaining your appliances and air conditioning system can all help you avoid common causes of mold. 

Will Rates Increase After a Mold Damage Claim? 

It’s likely premiums will increase after filing a claim. Having a claim on record means you’re likely to file another one, making you riskier in the eyes of the insurance provider.

If you have a loss-free credit (a discount for zero history of claims) on your homeowner policy, you would see your rates increase after a mold claim since you would now lose this discount, Hickey noted. Premium increases could also result from the total number of claims filed in the past. For example, multiple homeowner claims within a short period may result in a greater increase. 

If your mold problem costs less to fix than your deductible is high, you may want to consider paying for the cost to fix it yourself rather than filing a claim with your insurance company to avoid a premium increase. 

To lower your premiums you can look into every possible discount available, increase the deductible, or switch providers.