Whether mold is covered by homeowners insurance often comes down to the source of moisture and the wording of a policy.

Mold strikes fear into the hearts of those who’ve heard horror stories about toxic mold, expensive mold remediation, and denied homeowners insurance claims. Yet mold can be found anywhere, including in most homes in New Jersey.

Mold needs moisture to thrive. Problems can arise for homeowners when the presence of persistent moisture goes undetected or unresolved, leading to widespread mold growth. Moisture can result from (amongst other things) high indoor humidity, flooding, or a leaky roof or dishwasher.

Whether mold damage is covered by homeowners insurance often comes down to the source of that moisture. Take an hour or two to review the language of your policy, especially as it pertains to water damage. Look for mold exclusions or limitations. Call your agent if the wording is unclear.

Mold and homeowners insurance:

Most basic homeowners insurance policies exclude coverage of damage caused by mold, fungi, and bacteria, yet that doesn’t mean a mold claim will be denied automatically.

In most cases, if mold results from a sudden and accidental covered peril, such as a pipe bursting, the cost of remediation should be covered. That’s because technically the pipe burst is the reason for the claim, not the mold itself. Claims are more likely to be rejected if mold is caused by neglected home maintenance: long-term exposure to humidity, or repeated water leaks and seepage.

It’s hard to put a precise dollar figure on mold damage because most insurers don’t separate mold claims from water-damage claims. About 22% of all homeowners insurance claims result from “water damage and freezing,” a category that includes mold remediation. A 2003 report on mold put the cost of the average mold insurance claim between $15,000 and $30,000, at least five times the average non-mold homeowners claim at that time.

After a rush of mold claims in the early 2000s, most states adopted limitations on mold coverage. Amounts vary, but a typical homeowners policy might cover between $1,000 and $10,000 in mold remediation and repair. Most policies won’t cover mold related to flood damage. For that, homeowners need separate flood insurance, which averages $540 per year through the National Flood Insurance Program.

Damage done by an inch of floodwater:

Replace carpet, flooring $2,700
New baseboard molding $2,250
Replace drywall $1,350
Cleanup, materials $1,000
Bookshelves, lamps $500
Total $7,800 -

Is extra mold coverage necessary?

It might be possible to purchase a mold rider as an add-on to your existing homeowners policy. Ask your agent. A rider will offer additional mold coverage. Cost and your personal risk-tolerance are the driving factors behind a decision.

Premiums will vary based on where you live and the value of your house. You could pay from $500 to $1,500 a year for a rider on an existing policy. Prices tend to climb in humid southern climates, and in Texas and California, where there have been high-profile mold cases. New Jersey Mold Insurance prices have been relatively consistent over the past 10 years.

In general, older homes in humid climates where mold thrives will be more costly to insure than newer constructions in a dry climate. In particular, homes built within the past five years are likely constructed with mold-resistant wood, drywall, and paints. Newer homes are also less susceptible to water infiltration. (At least they should be)

If your insurance carrier isn’t willing to provide a rider because the risk is too great, specialty companies such as Unitrin might sell you a standalone mold policy. Brace yourself for a hefty price tag. Annual premiums for a standalone mold policy might range from $5,000 to $25,000. Weigh the cost against risk factors including the age and value of your home, its construction, and the prevalence of mold issues in your area.

Moisture prevention is the key

The surest way to avoid having a claim denied is keeping mold at bay in the first place. Preventing mold and eliminating mold when it does occur are critical to protecting the value of your home.

To help prevent mold growth in your home, I suggest taking the following steps:

Lower indoor humidity with air conditioners, dehumidifiers, and exhaust fans.
Inspect hoses and fittings for leaks on appliances, sinks, and toilets.
Use household cleaners with mold-killing ingredients (where applicable).
Opt for paints and primers that contain mold inhibitors.
Clean gutters to avoid overflow and check roof for leaks.
Avoid carpet in wet areas like basements and bathrooms.
Remove and dry carpet, padding, and upholstery within 48 hours of flooding.

For more information on Mold Related issues in New Jersey, contact MasterTech Environmental at 856-220-5334 or email us here.

Years ago, people would only use their Homeowners Insurance in the event of a catastrophic loss: their house burned down, or burglars stole all their belongings. It was a common rule of thumb that homeowners would use their insurance on the average, two point something times during their lifetime. If someone backed into the side of the garage on the way to work, they would take care of it and not submit a claim. Because of that, insurance companies did not penalize homeowners for using their insurance.

Nowadays that mindset is changing. Many people feel that since they are paying for the insurance, if the occasion arises, they are going to submit a claim. If they are only going to get five dollars after the deductible, they are still going to make the claim. The insurance companies are tracking these losses. Now they are starting to increase the cost of insurance for those people that are making numerous claims, and they are even nonrenewing policies for homeowners who have multiple claims. The insurance companies feel that homeowners should not be using their insurance for home maintenance.

Insurance companies are also phasing out lower deductibles. Some companies no longer have a $100 deductible or $250 deductible. The $500 deductible could be next. Insurance companies are now adding a 1% or 2% deductible - 1% or 2% of the dwelling amount - the amount you are insuring your house for. If you insure your home for $500,000, a one percent deductible would be five thousand dollars. A two percent deductible on that same house would be ten thousand dollars! You can see that the insurance companies are trying to do away with small claims.

That is not necessarily a bad thing. Some insurance companies will charge for a deductible lower than the standard deductible. On the other hand, they will discount for a deductible higher than the standard deductible. In this age of rising costs, taking a higher deductible might make good sense. I strongly urge you to discuss the deductible options your insurance company has available with your insurance agent.

So what does this have to do with Home Maintenance? If you come home from work some night and discover your house filled with smoke, you may have suffered a "puff back". Your clogged furnace exhaust just filled your house with oily smoke instead of going up the chimney. Now you have to have your walls and furniture cleaned. Maybe your clothes have been smoke damaged. You probably could have prevented this disaster by having your furnace cleaned and serviced.

Maintaining your home could prevent a number of costly claims. Have your furnace cleaned and serviced. Replace worn shingles on your roof. Replace the hoses on your washing machine. You may prevent claims, avoid large out of pocket expenses, and afford a higher deductible which could in turn lower the cost of your homeowners insurance.