SoFi

Car insurance protects you financially in case you’re in an accident or your car is damaged or stolen. There are several different types of car insurance coverage out there, each of which serves a different purpose. Understanding the ins and outs of each type is essential to making smart decisions that protect you, your passengers, and your car.

Main Types of Car Insurance Coverage

There are four main types of insurance for cars: liability coverage, comprehensive coverage, collision coverage, and uninsured and underinsured motorist coverage. Here’s a closer look at each.

Recommended: Auto Insurance Terms, Explained

Liability Coverage

Liability coverage helps cover the cost of damages to other people involved in an accident when you are at fault. So, for example, if you were to miss a stop sign and hit an oncoming vehicle, you would generally be considered at fault. Your liability coverage would cover the cost of repairs to the other driver’s car, their medical bills and lost wages, and other related expenses.

Most states require that you have liability coverage, though minimum car insurance coverage requirements will vary. California, for example, requires:

•   $30,000 for injury/death to one person

•   $60,000 for injury/death to more than one person

•   $15,000 for damage to property

New York, on the other hand, has a very different set of requirements:

•   $10,000 for property damage for a single accident

•   $25,000 for bodily injury and $50,000 for death for a person involved in an accident

•   $50,000 for bodily injury and $100,000 for death for two or more people in an accident

You may choose to carry coverage beyond the minimum requirement to protect yourself against costly accidents. For example, if you are covered for $10,000 in property damage in New York and you cause $20,000 in damage, your insurance will only pay for $10,000. You’ll have to come up with the rest yourself.

Comprehensive and Collision Coverage

Collision coverage helps pay for the cost of repair or damage to your vehicle if you are at fault in an accident. It will also help pay for damage if you hit an inanimate object, such as a building, tree, guardrail, or retaining wall. Collision coverage typically has a deductible that you pay out of pocket first. Then the insurance kicks in and pays the rest.

For example, if you have a $500 deductible and your car sustains $2,500 in damages, you’ll pay $500 and your insurance will cover the other $2,000.

No state requires collision coverage. But if you have an auto loan or lease, your lender or lessor will likely require you to have it.

There are situations in which you might consider doing without collision coverage. For example, if you own your car outright and it’s not worth much, it may be cheaper to pay out of pocket to repair or replace the car than it would be to pay a monthly premium.

However, if your vehicle is more valuable or you don’t have the money on hand to pay to replace it, you may want to add collision coverage to your policy.

Comprehensive coverage helps pay for auto damage outside of a collision. That damage could result from random incidents such as vandalism, hitting an animal, hailstorms, or a fallen tree branch. Again, if you have an auto loan or lease, those contracts will likely require you to carry comprehensive coverage.

Recommended: Online Auto Insurance Coverage

Uninsured and Underinsured Motorist Coverage

Unfortunately, not everyone on the road carries insurance. Even if they do, they may not carry enough to cover the cost of the damage caused by an accident.

That’s where uninsured and underinsured motorist coverage comes in. Several states require both types of insurance. These policies pay when the at-fault party’s insurance — or lack thereof — doesn’t.

What’s more, if you’re in a hit-and-run accident, you may be able to file a claim on your uninsured coverage. Make sure up front by checking the fine print on any policy you may be considering.

Without uninsured motorist coverage, if you get into an accident with an uninsured or underinsured driver that results in vehicle damage or bodily injury, you might have to pay for car repairs and medical care out of your own pocket.

Additional Types of Car Insurance Coverage

There are additional types of insurance for cars that you may want to consider. Some are optional add-ons, while others may be mandatory in your state.

Guaranteed Asset Protection (GAP) Insurance

If you have collision or comprehensive coverage and your car is totaled or stolen, that coverage will typically pay you up to the car’s depreciated value.

But what if you have an auto loan, or you lease, and you owe more on the loan than the depreciated value of your car? In that case, gap insurance can kick in and help you pay off your loan.

Personal Injury Protection (PIP)

PIP, also known as no-fault insurance, will help pay the costs associated with personal injury for you and your passengers, such as medical expenses, lost wages, disability, rehab costs, death benefits, and household services, such as child care or cleaning services. PIP covers you no matter who was at fault in the accident. This coverage is mandatory in some states and optional or unavailable in others.

Rental Car Reimbursement Coverage

Rental reimbursement is optional coverage that may help cover the cost of a rental car after an accident that leaves your own vehicle damaged and inoperable. To add this coverage to your policy, you’ll generally need to carry collision and comprehensive insurance as well.

Without this coverage, you might have to pay out of pocket for a rental car after an accident.

The Takeaway

Choosing the right car insurance is about protecting yourself financially and ensuring peace of mind while you’re on the road. By understanding the different types of coverage that are available, you can determine how much auto insurance you need and pick a policy to suit your needs and your budget. Revisit your policy regularly to make sure it still provides the type and amount of protection you need, so you can be prepared no matter what happens out there.

When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.

FAQ

What is “full coverage” car insurance?

“Full coverage” car insurance typically refers to a policy that includes liability, collision, and comprehensive coverage.

Should I get gap car insurance?

If you’ve leased or financed a vehicle, you may want to consider gap insurance. In fact, many lease agreements require it. If you have an auto loan, you might consider gap insurance if you made a small down payment, your loan term is 60 months or longer, or you purchased a car that depreciates quickly.

Do I need both comprehensive and collision coverage?

While you may not be required to have comprehensive and collision coverage, you may want to consider it anyway. Having both is especially worth looking into if you have a newer car or if you might not be able to pay out of pocket to repair or replace your vehicle.

Is PIP required in my state?

To find out if your state requires PIP, check the website for the state Department of Motor Vehicles.

What happens if I don’t have enough car insurance?

Not having enough car insurance can put you at financial risk. If you are the at-fault party in an accident and you don’t have enough insurance, you’ll be on the hook for the remainder of the cost for the damage you caused.

photo credit: iStock/asbe

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOPRO-Q225-036

A car insurance deductible is the money you have to pay out of pocket before your insurance kicks in. It can affect your premium and your financial responsibility in the case of an accident. Not all insurance coverage requires a deductible. Understanding which ones do, and how deductibles work, is key to making smart choices about the coverage you need.

What Is a Deductible & How Does It Work in a Claim?

It’s costly for insurers to process lots of small claims. For this reason, they charge a deductible in hopes of dissuading policyholders from making these claims. As a result, for certain types of car insurance coverage, you will need to take on the responsibility of paying a deductible.

The size of your deductible will affect the size of your premium. A clear understanding of what that means can help you with personal insurance planning, including how premiums fit into your financial plan.

Definition: Your Out-of-Pocket Share Before Insurance Pays

Your car insurance deductible is the amount of money your carrier requires you to pay before they’ll step in and pay the rest.

For example, say your collision coverage has a $500 deductible, and you’re in an accident where you are at fault. Your vehicle has $1,500 in damage. In this case, you will be responsible for covering the first $500. Your insurance carrier will then cover the remaining $1,000 to repair your vehicle.

Deductible vs. Premium Relationship Explained

In general, the higher your deductible, the lower your car insurance rate will be, and the higher your out-of-pocket expenses will be. Choosing a higher deductible may help you lower your car insurance costs each month.

On the other hand, the lower your deductible, the higher your monthly insurance rate, and the lower your out-of-pocket expense.

How Deductibles Affect Claim Payouts

Your deductible has a direct effect on your claims payout by determining how much you are expected to cover versus your insurance provider.

Which Coverages Have Deductibles?

Several coverage options typically have a car insurance deductible, including collision, comprehensive, uninsured motorist, and personal injury protection.

Collision coverage helps cover the cost of replacing or repairing your vehicle if you are in an accident in which you are at fault. This accident could be one in which you hit another car or a stationary object, such as a tree or a retaining wall.

Collision coverage is sometimes optional. If you finance your vehicle or you lease, your agreements may require that you have it. However, if you own your car outright, you may consider forgoing collision coverage, especially if your car is not very valuable.

Comprehensive insurance helps protect your car from events that aren’t an accident, such as fire, theft, vandalism, or acts of weather, like hail. These are all incidents that are essentially beyond your control. Comprehensive coverage is also not always mandatory, but lenders and leasing companies may require that you carry it.

Uninsured driver coverage helps cover the cost of repair or replacement in the event you are in an accident where you are not at fault and the other driver does not have enough insurance to cover these costs. Meanwhile, personal injury protection helps cover the cost of medical expenses and lost wages when you’re in an accident, regardless of who is at fault.

Recommended: How Car Insurance Works

Choosing Your Deductible: Balancing Cost and Risk

Choosing the right size deductible means striking a balance between your ability to cover the deductible, your risk tolerance, and the value of your car.

Here’s a closer look at the factors you’ll need to consider when choosing your deductible amount.

Cash Flow

Choosing a higher deductible is a good way to lower your monthly premiums, but you need to make sure that you have the cash on hand to pay the deductible should you need to.

You may have enough money coming in each month that cash flow isn’t a problem. But, if it might be, consider establishing an emergency fund to help you cover unexpected expenses like this. Conventional wisdom suggests building up an emergency fund equal to three to six months’ worth of expenses.

Risk Tolerance

The reason higher deductibles lower your premiums is that you are shouldering more of the risk in case of an accident. As a result, insurers are typically more willing to give you a discounted rate. However, you have to be comfortable taking on that risk. If you’re not, a lower deductible may be right for you.

How Likely You Are to File a Claim

Generally speaking, the more likely you are to file a claim, the more you may benefit from a lower deductible. If you are unlikely to file a claim, you may have greater savings with a higher deductible. So, consider your accident history or whether you engage in high-risk driving behaviors — such as speeding — when making your choice.

Value of and Condition of Your Vehicle

Consider the value of your car when choosing a deductible. The more your car is worth, the more it might make sense to have a higher deductible.

Paying Your Deductible: When and How

You’ll typically pay your insurance deductible once your claim is approved. The method of payment can vary. In some cases, your provider will pay repair shops directly. In this case, you’ll need to make a payment for your deductible to the repair shop as well, and your insurer will cut them a check for the rest.

If you’ve already paid for the repair, you may make a claim for reimbursement, in which case your insurer will send you a check for the amount of the repair minus your deductible.

Recommended: Who Gets the Insurance Check When a Car Is Totaled?

When Deductibles Don’t Apply

In general, you won’t have to pay a deductible if you are not at fault. In this case, the other driver’s liability insurance should kick in and pay for the cost of repair or replacement.

There are certain other situations in which you may not owe a deductible as well. For example, if you have glass coverage, you may not owe a deductible if you need to replace a windshield. You may check with your insurance representative to find out which deductible applies and when, or take a look at your car insurance declaration page.

The Takeaway

In the end, choosing the right auto insurance deductible comes down to understanding your personal budget, driving habits, and risk tolerance. Whether you choose to prioritize lower monthly payments or peace of mind should you need to make a claim, the key is making an informed decision that fits your unique situation.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

FAQ

Do I pay my deductible directly to the repair shop?

Yes, in some cases you’ll pay your deductible directly to the shop that repairs your car, and your insurance company will cut them a check for the rest.

Should I choose a $500 or $1,000 deductible?

The size of the deductible you choose will depend on a variety of factors, such as your ability to cover a higher deductible, whether you’re looking to lower your monthly premiums, your comfort in taking on additional risk, the value of your car, and your driving record.

Does liability insurance have a deductible?

Liability insurance covers the damage you cause to another person’s vehicle in an accident in which you are at fault. Liability coverage does not have a deductible.

What happens if damage costs less than my deductible?

If the damage to your car costs less than your deductible, you are on the hook for covering the full cost of repair. Typically, your insurance won’t cover anything.

Can I change my car insurance deductible anytime?

You can usually change your deductible amount at any time, not just when you renew. The policy change will typically take effect at the start of the next policy period. Contact your insurer directly to make a change.

photo credit: iStock/David Gyung
Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q225-037

Car insurance premiums vary widely depending on vehicle make and model. With the cost of car insurance on the rise — average annual premiums are $2,068 in 2025, according to U.S. News & World Report — finding a car that is both reliable and less expensive to insure may be a top priority.

This article takes a look at the cheapest cars to insure this year, including a breakdown of premiums by vehicle type, to help you strike a balance between a vehicle that meets your needs and a cost you can afford.

Cheapest Cars to Insure

Whether you’re a first-time buyer looking to trade in an older vehicle or simply trying to cut costs, you may consider the following nine cheapest cars to insure in 2025. This data is from a June 2025 survey conducted by Bankrate.

Cheapest Cars to Insure by Vehicle Type

Insurance premiums can vary widely depending on the type of vehicle you buy. For example, a sports car insurance rate might cost far more than a midsize SUV. Here’s a breakdown of the most affordable vehicles to insure across categories, including sedans, SUVs, and pickup trucks.

Cheapest Sedans to Insure

If you’re looking for a budget-friendly ride, these sedans stand out for their affordability.

Cheapest SUVs to Insure

SUVs combine practicality and strong safety ratings, which can help keep premiums down.

Cheapest Pickup Trucks to Insure

For those looking for even greater utility, these pickup truck models offer the lowest rates.

Recommended: Cheapest Car Insurance Companies

What Makes a Car Cheap to Insure?

Insurance companies consider a variety of factors when setting rates. Understanding these car insurance cost factors can help you choose a vehicle that’s cheaper to insure.

Lower Repair & Replacement Costs

Vehicles that cost less to repair — for example, those that use common or standard parts — are usually less expensive to insure, especially when it comes to collision and comprehensive coverage types. That’s because when you’re in an accident in which you’re not at fault, the other party’s insurance will kick in to cover damage. But if you are at fault, or you hit an inanimate object, your own collision or comprehensive coverage kicks in.

It also stands to reason that the more expensive a car is, the more expensive it is to replace. As a result, it represents a higher risk to insurers. And they’ll likely compensate for that risk with higher rates.

Strong Safety Ratings & Features

Strong safety features can decrease the likelihood of an accident and severe injury, which can decrease the size of insurance claims. For this reason, strong safety rates are often correlated to lower premiums.

Lower Likelihood of Theft

Comprehensive coverage typically covers the cost to replace your car if it is stolen. Statistically speaking, the more prone your vehicle is to theft, the higher your comprehensive rate may be. For instance, in 2023, Hyundai vehicles, especially those that lacked electronic immobilizers, were among the most targeted by thieves. As a result, premiums for these cars were relatively high.

Insurers will also look at factors such as geography. If you’re in an area that sees a lot of theft, premiums may be higher than in areas where theft is relatively rare.

Vehicle Size & Damage Potential

While larger vehicle size can make a car safer, it also increases the potential that it may cause extensive damage to other vehicles. Larger vehicles, such as those used for towing or hauling, may have higher liability rates. Liability coverage protects you against damages caused to another vehicle and passenger injury.

Larger vehicles that are used for commercial purposes may have an increased likelihood of claims, which can also increase insurance rates.

Driver Profile Plays a Key Role

Your profile and driving record play a big part in the cost of your insurance. Your premiums will likely be lower if you have never been in an accident and you don’t have any traffic violations.

Your profile may also play a key role. For instance, car insurance rates by age vary widely. Teens are typically in more accidents than older adults, and higher risk often translates into very high insurance rates. As teens gain experience, these rates typically decrease. Senior drivers tend to be the safest and are often offered lower rates.

Other factors, such as gender, may come into play as well. Male drivers tend to be in more accidents than female drivers, so premiums for men may be higher than for women.

Finally, insurers may take a look at your credit history. Insurers have found that poor credit is often correlated with higher claims. As a result, they see people with lower scores as high risks, which translates to higher premiums.

Recommended: Get an Insurance Quote

The Takeaway

When it comes to keeping car ownership affordable, choosing a vehicle with lower insurance costs can make a big difference. Factors such as driving history and your profile may come into play, but opting for models with low repair costs that are known for safety and reliability can go a long way toward keeping costs down.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

FAQ

Are SUVs more expensive to insure than sedans?

Generally speaking, SUVs tend to be less expensive to insure than sedans due in part to the fact that they tend to have relatively high safety ratings.

Does the color of a car affect insurance rates?

The color of your car does not affect your insurance rates. This is a well-worn myth. Insurance companies will look at other factors, such as the make, model, age, and usage of your car when setting rates.

Is my insurance guaranteed to be cheap if I buy one of these cars?

No, car insurance premiums are based on many factors. The rates given here are average, but the rates offered to you will be based on your personal circumstances, location, driving record, and profile. These factors could increase the cost of insurance.

Are older cars cheaper to insure?

Auto insurance might cost less for older cars. As your car depreciates in value, insurers have to pay less in the event of an accident. With older cars, you may decide to drop optional coverage, such as collision and comprehensive coverage. That said, your rate will depend more on factors like your location and the car’s make and model than it will on age.

photo credit: iStock/andreswd

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q225-038

Mold growth in your home is a serious concern. Not only can it lead to health problems and structural damage, but it may also require expensive home repairs. If you’ve found mold in your walls or basement, you may be wondering, “Does homeowners insurance cover mold removal?” The answer largely depends on what caused the mold to grow and how long it’s been lurking in your home.

Here’s a closer look at when homeowners insurance covers mold, when it doesn’t, and how to file a claim for reimbursement.

When Homeowners Insurance Covers Mold Damage

Homeowners insurance covers mold damage if it’s been caused by a “covered peril” listed in your policy. Some examples are:

•   A burst pipe

•   A broken water heater

•   An overflowing appliance, such as a washing machine or dishwasher

•   Water damage that came from extinguishing a fire

Let’s say, for example, your dishwasher starts malfunctioning and water leaks into your kitchen. If this leak causes black mold to grow on the floor, your homeowners insurance policy may cover the black mold’s removal charges and some or all of the floor replacement cost.

In addition to the mold being traced to a covered peril, the water damage must be a sudden and accidental occurrence. If the mold has been growing for a long time due to lax home maintenance, its removal probably wouldn’t be covered by homeowners insurance.

Homeowners insurance also won’t cover the appliance if it breaks down due to general wear and tear. If you’re looking for appliance coverage, consider a home warranty.

Recommended: Are Home Warranties Worth It?

When Homeowners Insurance Does Not Cover Mold Damage

In general, homeowners insurance doesn’t cover mold damage if it’s due to long-term neglect or deterioration. If the mold grew as a result of poor ventilation in your bathroom, for instance, the insurance company will likely consider it a preventable maintenance issue and not provide coverage.

Here are some instances when homeowners insurance doesn’t cover mold remediation:

•   Lack of regular upkeep: Homeowners insurance doesn’t cover plumbing issues that are the result of slow leaks or a lack of routine maintenance. Similarly, insurance won’t cover mold damage that stems from neglect or negligence. For instance, it wouldn’t cover mold that came from a leaky faucet you didn’t fix or rainwater that got inside because you left a window open.

•   Construction defects: You’ll also be out of luck if the mold grew due to leaks from poor construction, repairs, or building materials.

•   Flooding: A standard homeowners insurance policy doesn’t include flooding, though you can buy a separate flood insurance plan. Be aware that standard National Flood Insurance Program policies don’t cover mold damage.

•   Sump pump failure: A sump pump drains water away from your property, but if it fails, your basement might flood. When mold damage results from a broken sump pump, a homeowners policy usually won’t cover that. But if you have purchased optional sump pump and water backup coverage as an add-on, such homeowners policy options might cover mold from a sudden sump pump failure, broken drain, or backed-up sewer line.

Read over the fine print of your policy to understand whether your homeowners insurance covers mold. If you opt for flood or sump pump riders, expect these add-ons to increase your monthly homeowners insurance policy costs.

Preventing Mold Damage in Your Home

Mold can damage the structure of your home and be a hazard to your health. Here are a few tips to prevent it from spreading in your house.

•   Routinely inspect pipes, faucets, and appliance hoses and fix any leaks as soon as possible.

•   Clean bathroom tile and other non-porous surfaces with bleach or another mold-killing product.

•   Use dehumidifiers or air conditioners in your home to reduce humidity.

•   Install exhaust fans in your kitchen and bathrooms to improve ventilation.

•   Get rid of carpet in areas that tend to get damp, like your basement or bathrooms.

•   Look for leaks in your roof or water in your attic regularly.

•   Clean out your gutters and make sure they drain rainwater away from your house.

•   Seal doors and windows to keep moisture out of your home.

•   Clean up spills or water damage right away, and let areas dry out completely before you replace a wall, flooring, or other material.

Controlling moisture in your home with regular maintenance and repairs can reduce the risk of mold. If you need medical coverage for mold-related health problems, you may want to check out this guide to health insurance.

How to File a Mold Claim

If you need to file a mold claim, contact your insurance company right away. You’ll also want to address the mold issue as soon as possible to prevent spread. Here are some steps you’ll need to take.

•   Stop the leak right away: If a pipe bursts, shut off the main water valve to prevent more water from leaking into your home. Cover up holes in your roof or other damaged areas that are letting water into your home.

•   Take photos of everything: Document the damage with photos and videos to provide evidence when you submit your claim.

•   Dry up the affected areas: Clean up mold-infested areas and use a fan or dehumidifier to get rid of moisture. Remove the wet carpet and dry the items that got soaked. Certain cleaning products, including vinegar, can help combat mold growth.

•   File your mold claim: Some insurance companies let you file online, over the phone, or via mobile app. Contact your insurance provider if you’re unsure about how to file your claim or have other questions about how thoroughly your homeowners insurance covers black mold.

•   Keep your receipts: If you paid to make repairs or relocate damaged items, keep your receipts to file for insurance reimbursement. Your insurance provider may also help you find professional cleanup specialists in your area, such as a water removal contractor or mold remediation company.

Since insurance companies typically don’t cover mold that’s due to neglect or long-term moisture, you must show that a sudden covered event led to the mold in your home and that you tried to mitigate the damage. By documenting your cleanup efforts, you can show that the mold was unavoidable. That evidence should increase your chances of claim approval.

The Takeaway

Mold can cause serious home and health problems if left unchecked. It isn’t always possible to avoid it completely, especially after random occurrences like the bursting of a pipe. Your homeowners insurance policy may cover mold removal or home repairs. As a rule of thumb, if the mold is the result of a sudden covered event, you may be reimbursed. If the mold came about due to a long-term leak or other issue, you’ll probably have to shoulder the costs.

When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.

FAQ

Is mold caused by a leaky roof covered by insurance?

Mold caused by a leaky roof may be covered by insurance if it was caused by a “covered peril” in your homeowners insurance policy. For instance, you may have coverage if the leaky roof was caused by hail damage, a fallen tree, or a fire. If the leaky roof was due to regular wear and tear, however, then your insurance wouldn’t cover the resultant mold (or the damaged roof).

How expensive is mold removal?

Mold removal typically costs $10 to $25 per square foot, according to Angie’s List. This Old House estimates that mold remediation should cost $1,500 to $9,000 and puts the average cost at $3,500.

Does my policy pay for mold testing or inspection?

Your homeowners insurance policy may pay for mold testing and inspection if the mold came about as a result of a covered peril, such as a burst pipe or other sudden water damage. You’ll have to check your specific policy to find out how much it covers toward mold testing, inspection, and remediation.

Are health problems caused by mold covered?

Homeowners insurance doesn’t cover a policyholder’s mold-related health problems, but it may pay for someone else’s medical bills if they were injured on your property. This “medical payment to others” coverage, also known as Coverage F, can pay for someone’s doctor visits, hospital stays, and other medical care they needed due to a covered incident in or near your home.

Why is mold coverage so limited by insurance companies?

Insurance companies limited their mold coverage in the early 2000s after several high-profile lawsuits required major payouts from the insurance industry. To cut costs, they revised their policies to cover only mold caused by sudden, accidental events, rather than long-term neglect or wear and tear. Homeowners insurance is now generally designed to cover sudden accidents rather than problems that arise due to a lack of maintenance.

photo credit: iStock/PonyWang
Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOPRO-Q225-040

When you get homeowners insurance, you hope that you never need to use it. Still, it’s important to understand what your policy covers before something unexpected, like water damage, occurs.

In general, homeowners insurance covers sudden and accidental water damage from internal causes, like a faulty water heater or a burst pipe. It won’t cover all causes of water damage, though. If the water damage is due to flooding or lack of maintenance, your insurance likely won’t kick in.

When Homeowners Insurance Covers Water Damage

As we mentioned, homeowners insurance will cover water damages in certain situations. For example, your policy may likely cover roof leaks caused by a storm but not ones caused by wear and tear on roof shingles. Similarly, if a pipe bursts in your home, the damage will be covered, but fixing the pipe itself will not.

It may be worth looking into whether your homeowners insurance covers plumbing issues. If, say, your water heater, dishwasher, or washing machine suddenly fails, your homeowners insurance probably won’t pay to replay the appliance, but it will likely cover the cost of the water damage.

When Homeowners Insurance Does Not Cover Water Damage

Homeowners insurance will not cover water damage from leaks that could have been prevented through proper maintenance. So, for example, does homeowners insurance cover water damage for a month-old leaking roof? Most likely not.

Flood damage is also not covered, but you can purchase additional flood insurance coverage.

Most homeowners insurance policies will also not cover damage from sewer backup or sump pump failure unless you have additional water backup coverage within your homeowners insurance policy. If you aren’t happy with your current insurer or policy, you can always look into changing homeowners insurance.

Recommended: What Does Homeowners Insurance Cover?

Preventing Water Damage in Your Home

You can help prevent water damage in your home if you keep up with routine maintenance and upkeep of your home. Clean your gutters and downspouts regularly so that debris and leaves do not clog them and cause water overflow issues. Frequently check major appliances like furnaces, sinks, dishwashers, washing machines, hoses, and pipes for leaks or other issues. If there is an issue, repair it promptly. Also, inspect your roof often for damaged, cracked, or worn shingles that could let in rain.

Keeping your thermostat high enough to prevent frozen pipes can also help prevent pipes from bursting — and damaging your home or property. During the winter, shut off the water supply to outdoor faucets and drain the lines.

It is important to know where your home’s main water shutoff valve is and how to use it so that if there is an emergency water leak, you can act quickly.

How to File a Water Damage Claim

In the event your home or property takes on water damage, you’ll need to act quickly. First, identify the source of the water damage, and stop the leak if you can. You should also try to dehumidify the room or area of the house to prevent mold.

Next, document the damage with photos and videos — this can help the insurance claim process run more smoothly. If you have any images of the same location from before the damage, that might also be helpful, although it is not a requirement. You should also take an inventory of any ruined personal belongings.

Recommended: Does Homeowners Insurance Cover Mold?

Clear communication with your insurance company throughout this process is key. Ask them for the preferred way to file a claim— in other words, online, by phone, or via the company’s mobile app — and report yours as soon as possible. An adjuster may schedule a visit with you after your file to investigate the damage.

Don’t plan to do any major work until your insurance company has reviewed the damage, though some temporary fixes are OK. For example, you might want to throw out a wet carpet to prevent mold from growing or shut off water to a broken pipe. Keep receipts from any purchases you make related to the water damage, as you may get reimbursed from your insurance company.

Recommended: How Much Is Homeowners Insurance?

The Takeaway

Water damage in your home can be highly inconvenient — and expensive. The cause of the water damage may determine whether your homeowners’ insurance will cover the damage or not. If the water damage was due to sudden and accidental leaks, you will likely receive reimbursement. But if the damage was due to flooding, sewer backup, sump pump failure, or general wear and tear, you likely won’t receive reimbursement.

If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.

FAQ

Is water damage from a leaky roof covered by insurance?

In general, homeowners insurance will cover water damage from a leaky roof if the leak was sudden and accidental and caused by a covered reason. If the water damage is due to flooding or lack of maintenance, for example, insurance likely won’t pay for the damage.

How expensive is water damage repair?

Water damage repair costs will vary depending on what needs repairing, how extensive the damage is, and where you are located. According to the home services website Angi.com, water damage restoration costs $3,828 on average, but ranges from $1,364 to $6,296.

Does my policy pay for leak detection or water removal services?

Homeowners insurance generally won’t cover leak detection or water removal services unless the leak is caused by a sudden, accidental event like a burst pipe.

Is damage from sewer backup or sump pump failure covered?

Most homeowners insurance policies will not cover damage from sewer backup or sump pump failure unless you have additional water backup coverage within your homeowners insurance policy.

Why isn’t flood damage covered by standard policies?

Flood damage is typically not covered by standard policies. However, you can purchase separate flood insurance. Even if you don’t live in an area that is flood-prone, it is advisable to have flood insurance because floods are the most common and costly natural disasters in the United States.

photo credit: iStock/coldsnowstorm

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q225-041