The disaster in Texas, for the unfortunate souls living there, reminds us how vulnerable we can be, and how being prepared before disaster strikes, can make the aftermath so much easier. While the odds of losing everything in a natural or man made disaster are relatively low, it helps to know that you took some steps ahead of time, like having a recent video tape of your entire home and it’s contents, and meeting with your insurance agent to update the coverage and discuss the available “riders” to minimize surprises at claim time.
But suppose your number is up, and you’re the victim of a huge natural disaster like Harvey, or have experienced some more local damage, like a tree falling on your house. What are the best practices for filing a claim for the damages your home and property have suffered?
Recently, the Consumer Federation of America (CFA) offered tips on how to get all that you’re entitled to from your insurance company. I’ve added my own personal tips based on my experience dealing with a homeowner’s insurance loss claim.
The CFA starts by noting a disturbing trend: families victimized by Harvey-related wind and flood damage will have to dig deeper into their pockets because few of today’s homeowners have federal flood insurance, and because insurers have been steadily increasing hurricane wind coverage deductibles and imposing other homeowners insurance policy limitations. Discuss flood coverage with your agent, find out the premium, and decide whether your risk is higher than average. If it’s only a few hundred dollars a year, it may be worth it. Also, most people are surprised that some wind damage to roofs may not be covered if your roofing has been neglected or is past its useful life.
Among the tips: Report your claim as promptly as possible, since insurance companies generally handle them on a first come, first serve basis. Be sure to write down your claim number, because insurance company claims departments locate your file most efficiently using your claim number.
Depending on the circumstances, you may be responsible for mitigating the damage. That is, if the dwelling was safe, and you had the ability to take steps to reduce the overall loss (say by shutting off the water supply in the event of a broken water pipe, or fixing a broken window), and you didn’t, your claim payout may be reduced.
Sometimes the damage requires a contractor to come out prior to an insurance adjuster’s arrival to mitigate the damage. Contractors by their very nature can be overzealous or aggressive, so try and be there onsite before they arrive to take pictures and control or limit their activities to damaged areas. You don’t want to be responsible for costs that may not ultimately be covered by insurance. In the case of water damage, keep samples of the wood flooring, carpeting, tiles or wall coverings before they’re hauled off the property. You’ll be glad you did when starting reconstruction and trying to find matching replacements. Remember, it’s your home; nobody cares more about it than you-let the contractors know you’re in charge, and that you won’t be pressured to make unnecessary improvements or replacements.
Meanwhile, maintain receipts for any expenditures related to immediate repairs you had to make to secure your home, or any living expenses (hotel, meals) if you could not return to your home in the wake of the storm, or as a result of your own home damage experience. (If your claim is limited to flood insurance, additional living expenses are usually not covered.)
When an adjuster arrives to survey your damage, ask if he/she is an employee of the insurance company, or an independent adjuster (I.A.) hired by that firm. If this person is an independent adjuster, ask if he or she is authorized to make claim decisions and payments on behalf of your insurance company, and ask for the name of the in-house company adjuster to whom the I.A. is sending your information.
Many insurance companies will send out one of their approved contractors to estimate your property damage. You are not under any obligation to use them, and you should realize that these approved contractors have likely agreed to limit repair costs based on average cost estimates in the area. You might benefit from getting an estimate from other local contractors, since your damage situation will be unique. Just because your insurance company approves of a contractor, that doesn’t mean they’re the best or most qualified for you.
Before you file a claim, know that it helps to have pictures or a video of your possessions, which you can file as evidence of what you’re claiming. Make as thorough a list of your possessions as you can ahead of time. When the claim is made, start a notebook documenting contacts with your insurance company and contractors, writing down the date, time and a brief description of every exchange. Keep receipts from emergency repairs as well as any costs you incur in temporary housing, which may be reimbursable under the “Additional Living Expense” portion of your homeowners’ policy.
Suppose the claim is denied or you feel the offer is too low. At that point, you should ask the company to identify the language in your homeowners’ policy that served as the basis for denying your claim or offering so little. Once the company pinpoints the appropriate language in the policy, you should be able to determine the fairness of the offer. If you feel that the company has slipped new limitations into the policy and has not adequately informed you, it might be a good idea to consult an attorney. If a structural engineer has deemed your repairs not due to a disaster (but say to normal wear and tear), it may pay to hire your own licensed structural engineer to refute the insurance company’s report. If it’s an independent engineer hired by the insurance company, and you disagree with his or her conclusions, you have every right to call and discuss their conclusions with them.
For those not living through Harvey, this might be a good time to look hard at your current policy. The CFA has noticed that new provisions are showing up which limit replacement cost payments, and many insurers no longer cover the additional costs to bring a damaged home up to new building codes (wiring, elevation for flood risk, etc.) Remember that sewer backup coverage is usually an additional low cost rider, so consider adding it, especially if your home has a finished or even an unfinished basement.
Once the insurance company tells you the reasons for its action, it cannot produce new reasons for denying payment or making a low offer at a later time. You have locked them in—an important protection for the consumer.
If you still feel that their claim settlement offer is too low, or the claim denial is wrong, complain to an executive in the firm’s consumer relations department (who is paid to keep consumers happy) rather than an executive in the claims department (who is paid to keep claims costs low). In the conversation, use the records you’ve kept since the claim process began. The more serious the insurance company sees that you are in documenting how you were treated, the more likely they will make a more reasonable offer.
If that doesn’t get you anywhere, complain to your state insurance department. All states will at least seek a response to your complaint from your insurance company, which will give you more information as you consider your next steps.
Your last option is to consult a lawyer. If you’re sitting in the attorney’s office, the notes you took take on additional importance. If your treatment was particularly bad, the courts in many states will allow additional compensation if the insurance company acted in “bad faith.” Since insurance companies take your money in exchange for their promise to make you whole when disaster strikes, they must act in utmost good faith in performing that obligation. With that said, it may be time to evaluate whether the insurance company you’re doing business with is “solid” and reputable enough to handle a flood of claims. Saving a few dollars on insurance premiums by using lesser known (and lesser capitalized) insurers may not be worth it.
Finally, try and be onsite to inspect each step of the rebuilding process once underway. Insurance repair estimates can be tediously detailed, and are not always easy to understand. But you want to be sure that the appropriate quality replacement materials are used, and that workmanship is of the highest standards. You may have to do some of your own legwork to find suitable replacement materials if the contractor tells you that your original materials are no longer available. After the work is done, you’ll likely find or remember (damaged) items that were missed during the original claim, so most insurance companies give you 1-2 years after the “claim date” to add other items that are detected, without having to file a new claim, or incurring a second deductible. Keep that important deadline in mind.
If you would like to review your current investment portfolio or discuss any other financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first. If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client is different, and so is your financial plan and investment objectives.
The MoneyGeek thanks guest writer Bob Veres for his contribution to this post