Making a Homeowner's Insurance Claim
Things Your Insurance Policy May Cover
Your House or Other Structure
In the event of complete destruction, your insurance company is required to pay for the construction of the residence or commercial building that has been destroyed. In order for that to happen, the insurer will first have to ascertain the replacement value of your home, that is, the cost to rebuild it.
In order to get the best settlement offer possible, start by making a list of any structural damage you are able to detect on your own. Make sure to inspect all buildings in your premises, such as swimming pool, garage, etc, before the insurance company adjuster shows up. Cracks on the walls, missing roof tiles and damage to the floors or ceiling should also be included on your list. If you suspect of any structural damage, even if it is not visible to naked eye, talk about it with your adjuster. In knowing this, the insurance company might hire a licensed engineer to examine the premisses, and if this is the case, you should ask for the electrical system to be inspected too.
When the time comes when you can repair the damage to your home, be sure to get written bids from reliable licensed contractors. These bids should list, in detail, any materials to be used and their respective prices.
Depending on the extent of the damage to your property, it may be very tough to determine the exact replacement value. Usually, the replacement value is based on the square footage of the property, and quality of construction and furnishings, among other aspects.
In most cases where the property suffered total destruction, the insurance company will not require the house to be rebuilt exactly the same as it was before the casualty. However, the insurance company will have to assess whether or not the foundation of your property has been damaged, and for that, they will hire an engineer to inspect the property.
Once the replacement value of your property has been ascertained, you will be able to hire a contractor and start the rebuilding of your home. The insurance company will pay the lowest amount of the following towards construction: the replacement value; the insurance policy limits; or the actual amount spent on construction. In the event that the costs of rebuilding your home goes over your allowance, the excess will have to be payed by you alone, and therefore it should be settled between you and your contractor.
Furnishings and Content Coverage
Your home furnishings are insured separately from the actual structure of your house. The contents are actually the most complicated issue to be dealt with in case of a total loss of your property. The insurance company will ask that you list all of your belongings for which you wish to make a claim on a form called "Schedule of Loss." When doing this, try to remember every part of your house, room by room. Think of all the things you had in every drawer, cabinet, closet, etc. The sooner you do this, the more likely you are to remember all the contents in your home.
Replacement Cost and Depreciated Value
You are only entitled to replacement value of the property you lose if you actually replace the item which has been lost. If you do not actually replace them, you will be paid the depreciated value, which is also known as the Actual Cash Value or AVC. If you choose to replace, you must replace the item with another one of similar value. If you choose not to replace it, the ACV value is generally calculated by determining the current replacement value of the item and then deducting an amount for depreciation. For instance, if the normal useful life of a particular item is 20 years and the item is 10 years old, you could expect to receive one-half of the cost of the item.
Time Limit for Replacements
Be aware that certain insurance policies have a time period within which replacement must be in effect. In certain circumstances, insurance companies may extend those time periods. Some policies provide that replacement must be completed within 180 days, some provide for one year and some policies have no specific time period.
If your policy provides that replacement must be effected within 180 days, but your home is a total loss, you will likely want to extend that time period, as you may have no place to put your replacement items until your home is rebuilt. If you are able to negotiate an extension, it is wise to confirm the extension in writing, with the adjuster.
Additional Living Expenses
Extra expenses incurred by you in the case of an evacuation may be covered under the "loss of use" part of your insurance policy. Be sure to keep all receipts for all extra costs relating to your relocation, such as emergency shelter, clothing and food, as the insurance company will require that you account for any covered expenses. Additional living expenses include, but are not limited to, food and housing costs, furniture rental and telephone or utility installation costs in a temporary residence, extra transportation costs, and relocation and storage expenses. In most cases, the insurance company will give money in advance for these extra costs, so keep in mind that any advanced money you receive will be counted toward your final claim settlement.
You need to look very carefully at your policy limits for additional living expenses. Many insurance policies provide for additional living expenses up to 20% of the insured value of the house. As with the contents, even though some insurance companies will provide a sizeable advance for additional living expenses in the circumstance of a total loss, there is no obligation on them to do so; the only obligation is to repay you what you spend based on receipts submitted. The additional living expense amount can be spent in any manner you wish, within reason, but once spent, there is no more money. In other words, if a person wishes to spend a month in a hotel and eat meals in restaurants, they would likely be entitled to reimbursement, but if their home is a total loss, it would be wiser to budget based upon how long you may be out of your home. It would be wise to assume that you could be out of your home for a long time; even though it generally takes only three to five months to build a new home, there are a limited number of builders.
Personal Property
Personal property is usually the most complicated issue when it comes to settlement of claims. The insurance company will provide you with a form to fill out, and you will need to list all of your belongings for which you want to make a claim. Make a list of all damaged items and be sure to include brand names and model numbers. That is specially true for appliances and electronic equipment. Items such as clothing, tools, sports equipment, linens, outside furniture, china, and hobby materials should also be included on your list. The price and age of everything you are making a claim on will need to be established, and a set of records, such as old receipts, photographs and bills will help you accomplish that. In case of a total loss or if you no longer have these types of records, you will have to do your best and work from memory. Try to remember, room by room, what was there, as well as when and where you bought that specific item. Don't forget to include how much you paid for it.
Do not wait for the worse to happen before you start documenting you belongings. Preparing for a major disaster and eventual insurance claim by video-taping and taking photographs of your personal property from time to time is advised. Then, keep these records in a different location, such as a bank safe deposit box, so it is not affected in case of your property being destroyed. Taking this simple advice may save you time and money in case anything happens in the future.
Landscaping - Yard Plants/Refuse Cleanup
Yard plants (trees, hedges, etc.) are insured, but on a reduced level, usually only about 5% of the dwelling coverage. Such landscaping coverage may also be restricted to a maximum off $250.00-$500.00 per plant. Policies may also provide for refuse removal costs.
Water Damage Caused When Fire Extinguished
An unlikely as it sounds, water damage can occur during a wildfire. Insurance policies usually do not cover flood damage to a property, and flood insurance can be added as a separate policy to your homeowners insurance policy for a small additional premium. However, if the water damage was caused by water used to extinguish a fire, it may be covered. Talk to your insurance company representative to check if the water damage caused to your home is covered by your policy.
Upgrades Necessary to Comply with Current Building Codes
In order to conform to the ever-rising safety and environmental standards, building codes periodically change. Most likely, the codes in your neighborhood have changed to some extent since your home was built. Because of this, when rebuilding your home, you may need to upgrade in order to comply with the new codes, and any extra expenses you incur may be non-reimbursable. To avoid this problem, ask your insurance company about adding "ordinance or law" coverage to your policy. Such coverage appears as an "endorsement."
Business Interruption Insurance
Business interruption insurance covers lost revenues incurred by a business due to a fire or other covered event that interferes with business operations. Business interruption coverage is not sold separately. It is added to a property insurance policy or included in a package policy. A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential. Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the profits you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses like electricity, that continue even though business activities have come to a temporary halt. After a major disaster, it can take more time than many people anticipate to get the business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in.
Extra Expenses Insurance
Extra expense insurance reimburses your company for a reasonable sum of money that it spends, over and above normal operating expenses, to avoid having to shut down during the restoration period. Usually extra expenses will be paid if they help to decrease business interruption costs. In some instances, extra expense insurance alone may provide sufficient coverage, without the purchase of business interruption insurance.
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