Causes of Homeowners Insurance Losses
Homeowners insurance provides personal property and liability protection.
A policy typically protects your home, garage and other structures
on the property, and the contents of your home, against perils outlined
in your policy. Liability protection covers accidental harm to others
while on your property. The policy also provides reimbursement for
living expenses if the damage or destruction of the home is caused
by an insured peril such as a fire or tornado that requires you
to live elsewhere during repair or rebuilding (click
here for more information on homeowners insurance coverage).
Causes of homeowners insurance losses
According to the Insurance Information Institute (III), 11.5% of
all home owners file a claim annually.
The Insurance Services Office, Inc. (ISO) collects data on the
types of insured losses that are filed by home owners. The chart
to the right provides this information for 1996–2000.
Mold-related losses
Receiving notable press has been the extent of claims associated
with mold. The cost of mold damage claims has been the focus in
many states, especially in southern and western states where hot,
humid and damp conditions provide ample opportunity for mold to
spread quickly.
Mold-related claims are included under “water damage”
in the chart below.
At the request of the Texas Insurance Commissioner, a study was
conducted to review the extent of new mold claims in the state and
their costs. The findings were alarming. According to the Texas
Department of Insurance and III, the number of mold claims increased
548% between the first quarter of 2000 and second quarter of 2001.
Claims per 1,000 Texas policyholders increased 581% during the same
time period. Losses associated with settling mold claims during
that period rose from $9.1 million to $77.8 million, a 755% increase.
Mold coverage by insurers
Because of the growing problem of mold and the confusion of what
is and is not covered by homeowners insurance, many insurance companies
have been inserting clarifying language in their homeowners policies
to provide a tighter definition of when mold damage is covered.
If the mold is the result of a covered peril (i.e. a burst pipe),
some insurers will cover mold damage up to a stated limit or up
to the limits of home-owners insurance coverage purchased by the
policyholder. Some companies are excluding all mold claims due to
extensive loss experience.
An April 2002 survey conducted by the Ohio Insurance Institute
of insurance companies representing 67% of Ohio’s homeowners
insurance market found:
- 25% cover mold if the result of a covered peril up to a stated
limit
- 20% of the companies cover mold if the result of a covered peril
up to the limits of the homeowners policy
- 22% of the insurers do not cover mold losses regardless of the
cause.
1 Data excludes tenants (renters) and condominium
owners insurance
2 Includes vandalism and malicious mischief
3 Includes coverage for unauthorized use of fund transfer cards,
and forgery and counterfeit currency
Source: Insurance Services Office, Inc.
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