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How homeowners insurance covers mold damage

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Brandi Schmitt and her family pose for a 2018 Christmas card in front of their Maryland home wearing protective gear, alluding to the water and mold damage in their home. Each year, Schmitt said they try to capture the family’s situation through their Christmas card.

Courtesy: Brandi Schmitt

When a nor’easter struck in 2018, intense winds blew shingles, gutters and siding off Brandi Schmitt’s home in Lothian, Maryland.

Her family was without electricity for three days, during which time all of their food in the refrigerator spoiled and water continued to leak into the home, Schmitt said.

As soon as the power came back on, Schmitt said she called her insurance company, USAA, to report the damage.

An adjuster visited the home a week later, and determined the 5,000-square-foot roof needed a total replacement. While she and the insurer debated points of the claim, Schmitt said, the unrepaired damage allowed snow and water from subsequent storms that spring to seep through into her home.

What started as wind and water damage evolved into something much worse: mold.

An independent specialist found no mold in the home on May 2018, according to a “review for fungal activity” investigation documents USAA provided to Schmitt that CNBC reviewed. Then in October, a follow-up investigation found and “observed visible moisture and an increased moldy odor.”

In the intervening months, Schmitt and her family had developed health issues, including rashes and coughs. Their yellow Labrador and four guinea pigs all died within months of each other.

An immunoglobulins test result from November 2018 provided to CNBC by Schmitt shows high levels of antibodies in her blood from exposure to aspergillus niger, a common mold.

“I called [USAA] and said, ‘Are you going to wait for it to kill us?'” Schmitt said.

The family moved out of the house for good that same month.

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Despite paying for extra “fungus, wet or dry rot” coverage of up to $15,000 in her policy, Schmitt said USAA did not remove wet insulation from the attic where she believes the mold is growing. Air samples in the home taken in January 2020 found “problem mold concentrations,” according to fungal activity review documents USAA provided to Schmitt.

Schmitt and her husband, Joseph, sued the insurer in 2019. A unanimous jury on March 7, 2023, determined USAA materially breached the terms of their homeowner policy and awarded Schmitt $41,480 for interior repairs and $7,200 for additional living expenses. She is currently appealing the damages because of estimates that repairs will cost much more.

A spokesperson from USAA said the company is unable to address specifics due to that ongoing litigation, but said “USAA disagrees with the facts as characterized by Ms. Schmitt.” In a response to the suit filed in a Maryland court in March 2020, an attorney for USAA said the insurer did not breach its contractual obligations and the Schmitt family failed to mitigate damages.

Schmitt’s example may be extreme, but mold damage is not unusual. In 2022, water damage, including mold, represented 27.6% of homeowners insurance losses, according to data from Insurance Services Office, an industry group. And experts say these kinds of damages could become more prevalent as severe weather events, especially windstorms and flooding, become more common or more powerful.

Repairing mold damage is expensive and often left out or limited in homeowners policies, which can leave consumers without much help to cover a pricey problem.

‘We called it at the time a mold stampede’

Mold limitations and exclusions in policies became the industry norm after rulings in several high-profile lawsuits. One Texas case, Ballard v. Farmers Insurance Group, in 2001 initially resulted in a $32 million jury verdict, sending shock waves through the insurance industry. Despite the award for the owner of the mold-damaged home later being reduced to $4 million, companies still pulled back on mold coverage.

“We called it at the time a mold stampede,” said Amy Bach, executive director of United Policyholders, a San Francisco-based nonprofit that advocates on behalf of consumers. Schmitt shared her experience with the group as she sought help with her claim.

“One carrier after another said, ‘We’re capping it, we’re limiting it,'” Bach said.

We called it at the time a mold stampede. One carrier after another said, ‘We’re capping it, we’re limiting it.’

Amy Bach

Executive director of United Policyholders

Along with high-profile lawsuits, the high cost of repairs, uncertainty around health outcomes and memories of hefty asbestos payouts drove insurers to exclude and limit mold coverage, experts say.

“That unknown risk of the development of losses over long periods of time, that’s the risk that the consumer is transferring to the company, and that’s why it’s so regulated,” said KPMG U.S. insurance sector leader Scott Shapiro.

Will Melofchik, general counsel for the National Council of Insurance Legislators, said the organization’s members haven’t come across an increase in mold claims specifically.

“As long as customers can get the coverage they need somewhere in the market, carriers should have the ability to exclude things as long as the exclusion is clear and customers are aware of it,” Melofchik said.

How insurance does — and doesn’t — cover mold

Today, standard homeowners policies typically do not cover mold, fungus, wet or dry rot, unless that damage is the result of a covered peril, according to Insurance.com. (In policies, you’re likely to see it referenced as “fungus, or wet or dry rot” coverage. Mold is a type of fungus.)

Homeowners may need to add a rider to their policy to cover removal of mold stemming from other circumstances, like water backup or hidden water damage.

Many of those changes took hold swiftly after the 2001 Ballard verdict. A 2003 whitepaper from the Insurance Information Institute, an industry group, notes that “seeking to avoid becoming the next Texas, some 40 state insurance departments have now approved mold exclusions and/or limitations on homeowners insurance policies.”

Still, mold exclusions and limitations can come as a surprise to policyholders, according to Bach.

“Consumers reasonably expect coverage when there is property damage to their home,” she said. “And mold can clearly cause physical damage to the property that it comes in contact with.”

Unless the mold damage is a result of a sudden, covered peril — such as a bursting pipe or water heater flooding your basement — homeowners insurance typically won’t cover it, said Scott Holeman, media relations director for the III.

“In cases where mold has been around for a while, say several weeks or longer, it likely won’t be covered by your policy,” Holeman said. “Mold claims won’t be covered if it’s a result of neglect, such as pipe leaking for months resulting in water damage and mold.”

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Peter Kochenburger, a visiting professor at the Southern University Law Center and professor at the University of Connecticut’s Insurance Law Center, says the policy language can be “convoluted.”

“You should always read your insurance policy and understand what you have, but no one’s going to do that,” Kochenburger said. “I do this for a living, look at insurance policies, and this is not easy.”

Insurance is regulated at the state level, which can cause additional confusion if some states have specific limitations and others don’t, he said. For example, in South Carolina, where hurricanes and flooding are common, there are no homeowner policies that cover all instances of mold, according to South Carolina Independent Agents. Instead, it’s determined by the peril.

Each company’s coverage is also different.

For example, USAA includes limited coverage — $2,500 for cleanup and $2,000 for additional living expenses — for mold resulting from a covered loss for no additional premium in most states, the company said in a statement. USAA also offers optional coverage beyond the standard policy in some states.

Nationwide covers up to $10,000 of mold damage caused by covered incidents, but that limit cannot be increased, according to a company spokesperson.

Mold claims can lead to nonrenewal of policies

Of a sample of anonymized home insurance-related complaints made about Allstate and Nationwide, 8% were mold related, according to data provided to CNBC by the Federal Trade Commission through the Freedom of Information Act. CNBC requested complaints about “home insurance” for a sampling of some of the largest property and casualty insurance companies, including Allstate, Nationwide and State Farm. State Farm had no mold-related complaints.

Most complaints focused on insurers limiting coverage on mold, but a few people mentioned seeing consequences when it came time to renew their policy. One policyholder in Lindsey, Ohio, said Allstate chose not to renew their policy in 2020 because they made a mold claim the year prior. 

“Any limitations in terms of non-renewal do vary by state and are part of the regulatory framework,” Shapiro said. “Generally speaking, insurance companies do have the right to not renew you for any number of reasons, including prior loss history, which is often a trigger event.”

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A Nationwide spokesperson said the company does not comment on individual claims. An Allstate spokesperson did not respond directly to a request for comment about the complaints, but directed CNBC to the III. Mark Friedlander, director of corporate communications at the III, said the volume and frequency of claims activity can be one of the reasons insurers choose not to renew a policy.

Insurance experts and attorneys recommend carefully reviewing the details of your insurance policy and consulting a professional to make sure you understand what’s included in the coverage.

Shapiro said insurers assessing future risk aren’t homing in on mold specifically yet, but it falls under the macro-issue of how climate will impact insurance, which the industry is tracking closely.

“There will be a limit to what insurance companies can do where society needs to come and assist with either affordability, incentivizing behavior, changing behavior, and that, in our view, doesn’t fall exclusively on an insurance company,” he said.

Six years after the nor’easter struck, the Schmitt home still sits uninhabited.

Schmitt and her family return to stay at the home occasionally so it’s not considered vacant or abandoned — and she said she still gets sick during those brief visits.

“During all this process, we never got to enjoy this house,” Schmitt said. “My husband and I have been together for many years and working really, really hard to be able to afford a home like this.”

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Disability advocates sue Social Security and DOGE to stop service cuts

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A Social Security Administration (SSA) office in Washington, DC, March 26, 2025. 

Saul Loeb | Afp | Getty Images

A group of disability advocates filed a federal lawsuit against the Social Security Administration and the so-called Department of Government Efficiency on Wednesday aimed at stopping cuts to the agency’s services.

Recent changes at the Social Security Administration under DOGE — including staff reductions, the elimination of certain offices and new requirements to seek in-person services — have made it more difficult for individuals with disabilities and older adults to access benefits, the lawsuit argues.

The complaint was filed in the U.S. District Court for the District of Columbia.

The plaintiffs include the National Federation of the Blind, the American Association of People with Disabilities, Deaf Equality, the National Committee to Preserve Social Security and Medicare, the Massachusetts Senior Action Council and individual beneficiaries.

“The defendants’ actions are an unprecedented and unconstitutional assault on Social Security benefits, concealed beneath the hollow pretense of bureaucratic ‘reform,'” the complaint states.

In nine weeks, the new administration has “upended” the agency with “sweeping and destabilizing policy changes,” the plaintiffs claim, that have shifted agency functions to local offices while slashing telephone services.

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“The result is a systematic dismantling of SSA’s core functions, leaving millions of beneficiaries without the essential benefits they are legally entitled to,” the lawsuit complaint states.

The “mass restructuring” of the agency is unlawful and violates the Rehabilitation Act and the Administrative Procedure Act, the lawsuit argues. The changes also violate multiple constitutional provisions, including the First Amendment right to petition the government for redress of grievances, according to the plaintiffs.

With 1.1 million disability claims pending, the recent actions could also be life threatening to individuals who are dying or going bankrupt while waiting for decisions, they allege.

The Social Security Administration did not respond to CNBC’s request for comment.

“President Trump has made it clear he is committed to making the federal government more efficient,” White House spokesperson Liz Huston said in an email statement. “He has the authority to manage agency restructuring and workforce reductions, and the administration’s actions are fully compliant with the law.”

Lawsuit alleges reform is ‘administrative vandalism’

People hold signs during a protest against cuts made by U.S. President Donald Trump’s administration to the Social Security Administration, in White Plains, New York, U.S., March 22, 2025. 

Nathan Layne | Reuters

The Social Security Administration sends monthly checks to around 73 million Social Security and Supplemental Security Income beneficiaries.

DOGE, which is not an official government entity, has been tasked with cutting “waste, fraud and abuse” within the federal government. President Donald Trump issued an executive order creating DOGE on Jan. 20, the same day he was inaugurated.

Since then, the Social Security Administration has cut 7,000 employee positions and closed the Office of Civil Rights and Equal Opportunity and the Office of Transformation. The Office of Civil Rights and Equal Opportunity handled the agency’s equal employment opportunity and civil rights programs. The Office of Transformation was responsible for coordinating customer service-related initiatives like adding the ability to use digital signatures and electronic documents.

The Social Security Administration has also changed its identity proofing policies for claiming benefits and changing direct deposit information that is expected to require more individuals to visit the agency’s offices in person.

The agency has updated its policy, allowing individuals applying for Social Security Disability Insurance, Medicare, or Supplemental Security Income who cannot use a personal my Social Security account to complete their claim entirely over the telephone, starting April 14. 

The reforms amount to the dismantling of “core functions of SSA, abandoning millions of Americans to poverty and indignity,” according to the plaintiffs’ complaint.

“What the defendants frame as ‘reform’ is, in truth, administrative vandalism,” the lawsuit states.

Beneficiaries face long waits, overpayment issues

The plaintiffs include seven individuals whose experiences, including long customer service waits and, in some cases, demands to repay large sums to the Social Security Administration, are detailed in the complaint.

One plaintiff, Treva Olivero, who has been legally blind since birth, was informed in March 2024 that she had been overpaid Social Security disability insurance benefits for five or six years, prompting the agency to demand she repay more than $100,000, according to the complaint.

Olivero’s Medicaid coverage was also terminated soon after, which left her without income and health coverage. She has since been in an “ongoing struggle” to have her disability benefits reinstated, while also facing almost $80,000 in medical debt, according to the complaint.

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Another plaintiff, Merry Schoch, who received Social Security disability insurance for many years, returned to work to help pay for large medical bills after she was hit by a waste management truck in 2022. She reported her income to the Social Security Administration, and the agency made no changes to her benefit payments, according to the complaint.

Two years later, Schoch stopped working and reported her unemployment to the Social Security Administration. In August 2024, the agency then terminated her benefits and informed Schoch that she owed $30,000 for the disability benefit payments she received while working full time, according to the complaint.

Last September, Schoch was informed she could reapply for benefits. However, she has since struggled to get in touch with the agency over the phone, online and in person. 

Both Olivero and Schoch are members of the National Federation of the Blind, which is also a plaintiff.

The plaintiffs want the court to reverse the Social Security Administration’s recent reforms, including staff reductions, closures of certain offices and policies requiring in-person appointments.

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Amid trade turmoil, ‘you do not want to time the market’

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Pres. Trump unveils sweeping tariffs: Here's what to know

As President Donald Trump rolls out sweeping new tariffs on goods imported into the United States, Americans are growing increasingly pessimistic about their financial fate.

Consumers worry that the duties will cause inflation to flare up again, while investors fear that higher prices will mean lower profits and more pain for the battered stock market

As of Thursday morning, futures tied to the Dow Jones Industrial Average were down 1,200 points, or 2.8%. S&P 500 futures sank 3.4%, and Nasdaq-100 futures lost 4%.

But sharp drops — or sudden spikes — in the market are to be expected, according to Jean Chatzky, CEO of HerMoney.com and host of the podcast HerMoney with Jean Chatzky.

“With these volatile markets, you do not want to time the market,” she said of the old adage. “Timing the market doesn’t work — it’s time in the market.”

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Trade tensions, inflation and concerns about a possible recession have undermined consumer confidence across the board, several studies show.

Still, it’s normal for most Americans to feel unnerved during heightened volatility, Chatzky said.

“There’s very little doubt that consumers are feeling nervous, maybe more nervous than we’ve felt in quite some time,” she said.

Committing to setting money aside in a high-yield savings account, whether by scaling back on dining out or rideshare expenses, will help regain some financial control, Chatzky said.

Top-yielding online savings accounts currently pay 4.4%, on average, well beyond the savings account rates at some of the largest retail banks, which average just 0.41%.

“Taking action is the best way to feel more resilient,” she said.

It’s understandable why some may be hesitant to continue investing, however, when you are investing for the long term, a down market is an opportunity for dollar-cost averaging, which helps smooth out price fluctuations in the market, Chatzky said.

This is also a good time to check your investments to make sure you are still allocated properly and rebalance as needed, so you are not taking on more risk that you are comfortable with, she added.

Timing the market is a losing bet

Talk yourself down from making any sudden financial moves, Chatzky advised.

Trying to time the market is almost always a bad idea, other financial experts also say. That’s because it’s impossible to know when good and bad days will happen.

For example, the 10 best trading days by percentage gain for the S&P 500 over the past three decades all occurred during recessions, often in close proximity to the worst days, according to a Wells Fargo analysis published last year.

And, although stocks go up and down, the S&P 500 index has an average annualized return of around 10% over the past few decades.

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How to file for a free tax extension if you can’t make April 15 deadline

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Galina Zhigalova | Moment | Getty Images

If you can’t file your taxes by the April 15 deadline, there’s a free, easy way to submit a federal tax extension online, experts say.  

Nearly 1 in 3 American admit that they procrastinate when it comes filing their taxes, according to a January survey of more than 1,000 U.S. filers from IPX1031, an investment property exchange service. In addition, about 25% do not feel prepared to file their taxes, the survey found.

As of March 21, the IRS received roughly 80 million individual returns of the 140 million expected this filing season, the agency’s latest reporting shows.

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Many natural disaster victims have an automatic tax extension, which varies by jurisdiction. Military members serving in a combat zone also have more time to file. 

However, the federal tax deadline for the majority of taxpayers is April 15. It’s possible to push that due date to Oct. 15 by filing for an extension.

But “it’s an extension to file, not an extension to pay,” said Jo Anna Fellon, managing director at financial services firm CBIZ.

“It’s an extension to file, not an extension to pay.”

After the tax deadline, you will start incurring the failure-to-pay penalty of 0.5% of your unpaid taxes for each month or partial month that your taxes remain unpaid. The failure-to-pay penalty has a maximum charge of 25% of your unpaid taxes.

That’s cheaper than the failure-to-file penalty, which applies when you don’t submit your return by the deadline. The failure-to-file penalty is 5% of unpaid taxes monthly, also limited to 25%.

But you’ll also owe interest on your unpaid balance, which is currently 7% and accrues daily after April 15.

You can estimate your taxes owed by creating a “pro forma return” — or mock version of your filing — using as many tax forms as possible, Fellon said.

The ‘easiest way’ to file an extension

There are a few free options to file a tax extension.

For federal taxes, you can complete Form 4868 and mail it to the IRS. But it’s better to file digitally to avoid processing delays amid the agency’s shrinking workforce, experts say. Paper filing can also increase fraud risk, they say.

The “easiest way” is by choosing “extension” when making a payment for 2024, which automatically submits Form 4868, according to Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.

“It takes all of five minutes,” and you can double-check the transaction via your IRS online account, he said.

IRS Direct Pay

Internal Revenue Service

Alternatively, you can file your extension for free online via IRS Free File, a public-private partnership between the IRS and several tax software companies.   

For the 2025 season, you can use IRS Free File for returns if your adjusted gross income, or AGI, was $84,000 or less in 2024. But there’s no income limit to file an extension, Lucas said.

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