Personal Finance

How homeowners insurance covers mold damage

Published

9 months ago

August 11, 2024

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.

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.”

Sinking land could cost some U.S. homeowners 8.1% of their home value

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.”

Personal Finance

What student loan forgiveness opportunities still remain under Trump

Published

2 hours ago

April 26, 2025

Business Finance News

Halfpoint Images | Moment | Getty Images

Under the Biden administration, the U.S. Department of Education made regular announcements that it was forgiving student debt for thousands of people under various relief programs and repayment plans.

That’s changed under President Donald Trump.

In his first few months in office, Trump — who has long been critical of education debt cancellation — signed an executive order aimed at limiting eligibility for the popular Public Service Loan Forgiveness program, and his Education Department revised some student loan repayment plans to no longer conclude in debt erasure.

“You have the administration trying to limit PSLF credits, and clear attacks on the income-based repayment with forgiveness options,” said Malissa Giles, a consumer bankruptcy attorney in Virginia.

The White House did not respond to CNBC’s request for comment.

Here’s what to know about the current status of federal student loan forgiveness opportunities.

Forgiveness chances narrow on repayment plans

The Biden administration’s new student loan repayment plan, Saving on a Valuable Education, or SAVE, isn’t expected to survive under Trump, experts say. A U.S. appeals court already blocked the plan in February after a GOP-led challenge to the program.

SAVE came with two key provisions that lawsuits targeted: It had lower monthly payments than any other federal student loan repayment plan, and it led to quicker debt erasure for those with small balances.

“I personally think you will see SAVE dismantled through the courts or the administration,” Giles said.

But the Education Department under Trump is now arguing that the ruling by the 8th U.S. Circuit Court of Appeals required it to end the loan forgiveness under repayment plans beyond SAVE. As a result, the Pay As You Earn and Income-Contingent Repayment options no longer wipe debt away after a certain number of years.

There’s some good news: At least one repayment plan still leads to debt erasure, said higher education expert Mark Kantrowitz. That plan is called Income-Based Repayment.

If a borrower enrolled in ICR or PAYE eventually switches to IBR, their previous payments made under the other plans will count toward loan forgiveness under IBR, as long as they meet the IBR’s other requirements, Kantrowitz said. (Some borrowers may opt to take that strategy if they have a lower monthly bill under ICR or PAYE than they would on IBR.)

Public Service Loan Forgiveness remains

Despite Trump‘s executive order in March aimed at limiting eligibility for Public Service Loan Forgiveness, the program remains intact. Any changes to the program would likely take months or longer to materialize, and may even need congressional approval, experts say.

PSLF, which President George W. Bush signed into law in 2007, allows many not-for-profit and government employees to have their federal student loans canceled after 10 years of payments.

What’s more, any changes to PSLF can’t be retroactive, consumer advocates say. That means that if you are currently working for or previously worked for an organization that the Trump administration later excludes from the program, you’ll still get credit for that time — at least up until when the changes go into effect.

For now, the language in the president’s executive order was fairly vague. As a result, it remains unclear exactly which organizations will no longer be considered a qualifying employer under PSLF, experts said.

However, in his first few months in office, Trump has targeted immigrants, transgender and nonbinary people and those who work to increase diversity across the private and public sector. Many nonprofits work in these spaces, providing legal support or doing advocacy and education work.

For now, those pursuing PSLF should print out a copy of their payment history on StudentAid.gov or request one from their loan servicer. They should keep a record of the number of qualifying payments they’ve made so far, said Jessica Thompson, senior vice president of The Institute for College Access & Success.

“We urge borrowers to save all documentation of their payments, payment counts, and employer certifications to ensure they have any information that might be useful in the future,” Thompson said.

Other loan cancellation opportunities to consider

Federal student loan borrowers also remain entitled to a number of other student loan forgiveness opportunities.

The Teacher Loan Forgiveness program offers up to $17,500 in loan cancellation to those who’ve worked full time for “complete and consecutive academic years in a low-income school or educational service agency,” among other requirements, according to the Education Department.

(One thing to note: This program can’t be combined with PSLF, and so borrowers should decide which avenue makes the most sense for them.)

In less common circumstances, you may be eligible for a full discharge of your federal student loans under Borrower Defense if your school closed while you were enrolled or if you were misled by your school or didn’t receive a quality education.

Borrowers may qualify for a Total and Permanent Disability discharge if they suffer from a mental or physical disability that is severe and permanent and prevents them from working. Proof of the disability can come from a doctor, the Social Security Administration or the Department of Veterans Affairs.

With the federal government rolling back student loan forgiveness measures, experts also recommend that borrowers explore the many state-level relief programs available. The Institute of Student Loan Advisors has a database of student loan forgiveness programs by state.

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Personal Finance

Many Americans are worried about running out of money in retirement

Published

21 hours ago

April 25, 2025

Business Finance News

M Swiet Productions | Getty Images

Many Americans are worried they’ll run out of money in retirement.

In fact, a new survey from Allianz Life finds that 64% Americans worry more about running out of money than they do about dying. Among the reasons cited for those fears include high inflation, Social Security benefits not providing enough support and high taxes.

The fear of running out of money was most prominent for Gen Xers who are approaching retirement. However, a majority of millennials and baby boomers also said they worry about their money lasting, according to the online survey of 1,000 individuals conducted between January and February.

Separately, a new Employee Benefit Research Institute report finds most retirees say they are living the lifestyle they envisioned and are able to spend money within reason. Yet more than half of those surveyed agreed at least somewhat that they spend less because of worries they will run out of money, according to the survey of more than 2,700 individuals conducted between January and February.

Meanwhile, a Northwestern Mutual survey reported that 51% of Americans think it’s “somewhat or very likely” they will outlive their savings. The survey polled 4,626 U.S. adults aged 18 and older in January.

Since those studies were conducted, new tariff policies have caused disturbance in the stock markets and prompted speculation that inflation may increase. Meanwhile, new leadership at the Social Security Administration has prompted fears about the continuity of benefits. Those headlines may negatively affect retirement confidence, experts say.

With employers now providing a 401(k) plan and other savings plans versus pensions, it is largely up to workers to manage how much they save heading into retirement and how much they spend once they reach that life stage. That responsibility can also lead to worries of running out of money in the future, experts say.

How to manage the ‘fear of outliving your resources’

Because of the unique risks every individual or couple faces when planning for retirement, the best approach is typically to transfer some of that burden to a third party, said David Blanchett, head of retirement research at PGIM DC Solutions.

Creating a guaranteed lifetime income stream that covers essential expenses can help reduce the financial impact of any events that require retirees to cut back on spending, Blanchett explained.

That should first start with delaying Social Security benefits, he said. While eligible retirees can claim benefits as early as 62, holding off up until age 70 can provide the biggest monthly benefits. Social Security is also unique in that it provides annual adjustments for inflation.

73% of Americans are financially stressed

Next, retirees may want to consider buying a lifetime income annuity that can help amplify the monthly income they can expect. Admittedly, those products can be complicated to understand. Therefore Blanchett recommends starting out by comparing very basic products like single premium immediate annuities that are easier to compare.

“Unless you do those things, you just can’t get rid of that fear of outliving your resources,” Blanchett said.

Without a guaranteed income stream, retirees bear all of the financial risk themselves, he said.

“Retirement could last 10 years; it could last 40 years,” Blanchett said. “You just don’t know how long it’s going to be.”

Among retirees, there has been some hesitation to buy annuities, said Craig Copeland, EBRI’s director of wealth benefits research. Such a purchase requires parting with a lump sum of money in exchange for the promise of a guaranteed income stream.

“We see great increase in interest, but we aren’t seeing upticks in take up yet,” Copeland said. “I do think that’s going to start to change.”

What can help boost retirement confidence

To effectively plan for retirement, it helps to seek professional financial assistance, experts say.

Meanwhile, few people have a plan of their own for how they may live on the assets they’ve worked hard to accumulate, according to Kelly LaVigne, vice president of consumer insights at Allianz Life.

“This is something that you should not plan on doing on your own,” LaVigne said.

While the survey from Northwestern Mutual separately found individuals think they need $1.26 million to retire comfortably, the real number individuals need is based on their personal situation, said Kyle Menke, founder and wealth management advisor at Menke Financial, a Northwestern Mutual company.

In thinking about how life will look in 30 years, there are a variety of things to consider, Menke said. This includes stock market returns, taxes, inflation and medical expenses, he said.

Even people who have enough money for retirement often don’t feel confident in their ability to manage all of those factors on their own, he said. Financial advisors have the ability to run different simulations and stress test a plan, which can help give retirees and aspiring retirees the confidence they’re lacking.

“I think that’s where the biggest gap is,” said Menke, referring to the confidence Americans are lacking without a plan.

Personal Finance

Trump tariffs will hurt lower income Americans more than the rich: study

Published

23 hours ago

April 25, 2025

Business Finance News

Shipping containers at the Port of Seattle on April 16, 2025.

David Ryder/Bloomberg via Getty Images

Tariffs levied by President Donald Trump during his second term would hurt the poorest U.S. households more than the richest over the short term, according to a new analysis.

Tariffs are a tax that importers pay on foreign goods. Economists expect consumers to shoulder at least some of that tax burden in the form of higher prices, depending on how businesses pass along the costs.

In 2026, taxes for the poorest 20% of households would rise about four times more than those in the top 1%, if the current tariff policies were to stay in place. Those were findings according to an analysis published Wednesday by the Institute on Taxation and Economic Policy.

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For the bottom 20% of households — who will have incomes of less than $29,000 in 2026 — the tariffs will impose a tax increase equal to 6.2% of their income that year, on average, according to ITEP’s analysis.

Meanwhile, those in the top 1%, with an income of more than $915,000 a year, would see their taxes rise 1.7% relative to their income, on average, ITEP found.

Economists analyze the financial impact of policy relative to household income because it illustrates how their disposable income — and quality of life — are impacted.

Taxes by ‘another name’

“Tariffs are just taxes on Americans by another name,” researchers at the Heritage Foundation, a conservative think tank, wrote in 2017, during Trump’s first term.

“[They] raise the price of food and clothing, which make up a larger share of a low-income household’s budget,” they wrote, adding: “In fact, cutting tariffs could be the biggest tax cut low-income families will ever see.”

Meanwhile, there’s already evidence that some retailers are raising costs.

A recent analysis by the Yale Budget Lab also found that Trump tariffs are a “regressive” policy, meaning they hurt those at the bottom more than the top.

The short-term tax burden of tariffs is about 2.5 times greater for those at the bottom, the Yale analysis found. It examined tariffs and retaliatory trade measures through April 15.

“Lower income consumers are going to get pinched more by tariffs,” said Ernie Tedeschi, director of economics at the Yale Budget Lab and former chief economist at the White House Council of Economic Advisers during the Biden administration.

Treasury Secretary Scott Bessent has said tariffs may lead to a “one-time price adjustment” for consumers. But he also coupled trade policy as part of a broader White House economic agenda that includes a forthcoming legislative package of tax cuts.

“We’re also working on the tax bill and for working Americans, I believe that the reduction in taxes is going to be substantially more,” Bessent said April 2.

It’s also unclear how current tariff policy might change. The White House has signaled trade deals with certain nations and exemptions for certain products may be in the offing.

Trump has imposed a 10% tariff on imports from most U.S. trading partners. Mexico and Canada face 25% levies on a tranche of goods, and many Chinese goods face import duties of 145%. Specific products also face tariffs, like a 25% duty on aluminum, steel and automobiles.