Does my home insurance policy cover mould?
*This is not legal or personalised advice, but rather general information to give you more understanding of how your Australian home insurance policy might function in relation to mould.*
Now here’s the bad news – insurance will generally not cover mould itself. UNLESS, it can be proved that it’s directly resultant from a “listed event” (which you’ll find in your PDS).
You may find that your insurance company tries to find a reason to exclude mould damage from the claim – and they can do this if they determine the mould is not as a result of a listed event but rather is “atmospheric mould” or “environmental mould”. This could potentially refer to mould as a result of excess humidity, poor ventilation or similar and is typically listed in the exclusions section.
If a listed event has caused mould contamination in your home, it’s advisable to hire your own, independent mould inspector to conduct sampling and provide a detailed report nominating the cause. In my experience, inspectors contracted to insurance companies have an uncanny way of detecting “atmospheric mould” at a rate much higher than experts who are genuinely independent. In some cases, insurance may actually cover an independent inspection if you request it, however I find that it is better to engage and pay for your own choice of expert in the first instance and then seek reimbursement from the insurer afterwards, or the insurer may insist on using someone who will look out for their interests.
Things to think about when choosing a policy
Yes, your eyes will definitely glaze over when reading a PDS, but for most people their home is the biggest asset they’ll ever own and small things can make a big difference on what you’ll be eligible for in the incident of an insurance event.
Here’s a common example – There are two different policies that you’re deciding between for your home that is worth $500,000, one policy is $2000/year and the other is $2050/year. If the home is wiped out in a major incident like a flood or fire, you’ll need to have the home demolished and all of the debris taken away pre rebuild. This could cost roughly 10% of the insured amount of your home – so $50,000. The policy for $2050 may give you the $500k to rebuild the home plus the $50k for demolition and removal, but the $2000 option may only pay you $500k, minus demolition and removal fees. So now we’ve got what we think is $50 difference between two policies, but it’s actually $50,000 difference in the event that you need it.
Do not choose an insurance company based on price alone. To save money, it may be better to have a higher excess than reduce your sum insured amount. Also, you won’t necessarily have to pay that more expensive excess upfront in some instances, but can request that it be taken out of the settlement payment at the end of the claim. Where doubling or halving your sum insured amount may only change the policy price by a much smaller percentage, such as 10%. Increasing your excess to $5,000 may change the price by a higher percentage and the amount of coverage hasn’t changed.
The easiest way to improve your policy and to increase the number of losses that would be covered is to opt in for accidental damage, it’s referred to as a “catch all policy”.
Be aware that carpets, curtains and blinds are usually considered contents when you are estimating the value of the things you own. Floating floorboards CAN be considered contents. People generally underestimate the value of their contents. Many people may have at least $150k, or $200k-$300k if they have speciality items.
Check what you’re covered for in relation to flooding, especially if you’re in a flood zone. You need to be covered for flooding and storm damage AS WELL AS storm run off and rain run off.
Trees: if a tree falls in your yard and doesn’t hit the home and cause damage, it won’t be covered for removal since the tree itself isn’t insured. Only trees that fall onto the insured property and cause damage to the property will be covered. However, if a neighbour’s tree falls and you’re not insured...it’s at your cost.
Working from home means the home can be treated as a business premises. It’s always best to disclose if you work from home. Some insurance policies are great and others not so good, find out in the beginning. If you don’t disclose this, then need to claim, you could be denied.
If you’re renting your property out through Airbnb or another short-term accommodation provider, rather than having a long-term tenancy lease in place, you need to ask your insurer about coverage or they could deny or even void the policy.
General info about insurance policies
If you believe you have a claim with insurance, first check your PDS and any SPDS (Supplementary Product Disclosure Statement) supplied to you. Based on the date, identify which PDS/SPDS applies and check if your event is a listed event.
An “event” typically refers to a sudden/accidental/identifiable event that causes damage rather than a on-going, chronic issue. Long-term, chronic water damage is less likely to be covered by insurance.
Secondary damage refers to damage that is caused by the initial event but occurs over time, like mould growth.
Be aware of the three-day exclusion period for some types of loss. If you take a policy out and then there’s a bushfire or flood the next day you may not be covered.
Remember: insurance isn’t designed for wear and tear – a leaking roof that’s 30yo and leads to damage during a storm won’t be replaced. Insurance may fix the damage caused, but not replace the roof as it will be determined the roof was damaged by deterioration rather than the event itself.
If a pipe bursts, you may be covered for the damage caused by the leaking water (if eligible), but insurance won’t pay for repair of the pipe itself as they cover the damage caused not the pipe.
Leaking shower recesses/bases and bathroom waterproofing failures aren’t covered in most policies (I learnt this one the hard way).
If you pay monthly, understand that you will need to pay out the remaining months out of 12 if there’s a total loss claim made because your policy is based on an annual contract, even if you make the payments monthly. So, if you’ve paid for 2 months of the year then lodge a claim which ends up with you receiving the full sum insured in your policy, they’ll take out 10 months from the settlement payment.
Liability cover = if someone comes to your house and breaks their leg or is otherwise injured, you can potentially lodge this as a liability claim under your policy. It’s included in the policy and most insurance policies have similar levels of coverage for liability.
There’s been a water damage event, what do I do?
Attend to the issue as best as you can by turning off water mains (if applicable), and attempting to dry the area using fans/dehumidifiers/heaters, contacting a specialist water restoration/drying company.
Take LOTS of photos (and ideally, take photos of each area of your home once a year so that you have evidence of the “pre-loss conditions” if you need them”).
Call your insurance company to report the event as soon as possible – if required, they’ll do a “make safe” (i.e. stop any ongoing damage). A decent insurance company will do this in good faith to minimise loss while they assess if there will be a valid claim – and you shouldn’t have to pay it back in most instances, in my experience.
After the “make safe”, insurance will “validate” the claim if they believe they are liable, then “quantify” the loss (by looking at reports incl. mould testing technician/IEP reports (again, it’s highly recommended you provide these yourself), then there’s “settlement” which means they either do the repairs or agree to cash settle.
It is naïve to trust that your insurance company will look after your interests instead of their own interests in the case of an event. Become your own claims manager, set your expectations and get your own evidence, and don’t assume that the insurer will seek to gather evidence that will maximise the claim for you.
If you believe mould has become an issue, you should hire an independent inspector to determine the “proximate cause” ie. the dominant cause factor. For mould claims, it all comes back to cause. If applicable, your inspector can also support the claim that a reasonable person could not have known the event was occurring – i.e for a slow leak, you need to show that a reasonable person could not have found any evidence of it and as soon as it became apparent they did something about it.
If you hire an independent inspector, make sure you pay to sample every affected area – under-sampling will limit your ability to show the extent of contamination and fight your case effectively.
You can say you don’t want the insurer’s expert and engage your own trades. Just tell the insurer why, and why you’ve got concerns, sometimes they’ll even pay for it – it depends on the circumstances. Bear in mind, you do have an obligation under most insurance contracts to allow your insurer to send our whoever they want to, but this can sometimes be a point of negotiation.
If you feel that mould has been caused as a result of delays by insurance and negligence on their part, you may need to seek the help of an independent claims specialist as this may not relate to your PDS/contract, it might venture into common law/negligence claims.
Undergoing mould remediation through an insurance company
Unless you have clear reasons not to use the insurance company’s mould remediation team, it’s usually best to use the ones they supply to protect your finances. If you take a cash settlement for say $5000, then as the works are being completed it turns out there is $10,000 worth of mould removal (under scoping of the issue is common), it can be hard to recover those costs. Also, if the remediation works are not satisfactory, insurance is obligated to keep the project running until PRV (post remediation verification) is successful. If you’re financing the project independently, failed remediations and testing will need to be covered by you. The insurance company will also guarantee the completed works in many instances.
PRVs are a non-negotiable in this instance, in my opinion. This is different to a PRE (where a mould remediation company does their own final evaluation). You need to hire an independent inspector to test and verify the works. As contamination is often invisible, it is common for remediation projects to fail on the first round. A good insurer should cover the cost of an independent PRV, but even if you have to fund it yourself in the first instance it is a worthy investment as it is the surest way to protect your property and to ensure that it really IS remediated fully.
You’ve been denied a claim by your insurance company that you feel is valid – what’s next?
If you feel your claim has been unfairly denied, you can lodge an appeal with the insurance company, through its Internal Dispute Resolution (IDR) department. If the result is still unsatisfactory, you can go to AFCA (which operates as an ombudsman for the insurance and financial services sector).
Unless you’re a lawyer, it may be far more effective to pay a claims specialist to fight your claim. Depending on the business, they either charge a fee upfront and a fee on successful appeal, or will take a percentage of your settlement claim with no fees upfront.
Examples of these companies include Solve My Claim (which I have personally used) and ClaimsHero.
I hope you found these tips helpful and that they might assist you should you ever need them!