Revisiting Homeowners Claim Fundamentals: Tips for Before, During & After

Insurance coverage related to storm damage is one of our most frequent inquiries. OII is revisits this post (originally published in 2015) and its related news release,  providing updated resources and coverage information.

When faced with a homeowners claim, it’s your insurance company’s obligation to restore your home to its pre-loss condition, up to the limits and coverages of your policy. By contract, your insurer may either repair or replace any part of the damaged property with equivalent property.
As a homeowner, you also face certain obligations during the process.
OII provides tips and resources to help you understand the claims process and even prepare ahead of time.

BEFORE

  • Review your homeowners insurance policy and coverages in order to understand what is and, more importantly, what isn’t covered. All homeowners insurance policies have exclusions and limitations, and it’s best to know what these are prior to a loss. In some cases, coverage for exclusions can be obtained through endorsement, which ‘buys back’ or adds coverage to your policy
  • Homeowners policies contain ‘conditions’ and ‘loss settlement’ sections, including your duties following a loss. Ask questions about the claims and settlement processes before a loss. By familiarizing yourself with the claims process before disaster strikes, you can make necessary adjustments in coverage and be better prepared for the task ahead.
  • Evaluate the general condition of your property. Make repairs that might prevent future losses. Check sidewalks and steps for deterioration and major cracks that could create a safety hazard. Roofs and gutters should be checked annually for leaks.
  • Prepare a home inventory of your personal property and belongings. An inventory can be a timesaver after a personal property loss and will help to speed up the claims process. Many insurers provide online inventory tools like knowstuff.org to assist in this effort, so check with your company or agent. Also, see OII’s additional tips and resources on home inventories.
  • Opt for replacement cost coverage over actual cash value on your policy if possible. Replacement cost provides you with the dollar amount needed to replace a damaged item with one of similar kind and quality without deducting for depreciation—the decrease in value due to age, obsolescence, wear and tear and other factors. An actual cash value policy pays you the amount needed to replace the item minus depreciation.
  • Make sure you have enough coverage to replace your home and contents. This may or may not be the market value of your home, and  you do not need to insure the land your home sits on. According to Marshal Swift/Boeckh (now Corelogic), 60 percent of homes in the US were undervalued by an average of 17 percent in 2013. These figures represent an improvement from 2012 figures of 61 percent of homes being undervalued by 18 percent.

DURING & AFTER

  • Track all expenses associated with the loss. They may be reimbursable under your homeowners insurance policy. Examples could include mileage and meal expenses if called into court for the claim or temporary repairs made to protect against additional damage.
  • Keep copies of all your paperwork for future reference.
  • Don’t start permanent repairs until the insurance company claims adjuster has assessed the damage and you’ve been given the go-ahead.
  • You have the right to choose the contractor. Your insurer may provide you with a list of pre-approved contractors to save time and hassle, or you may be asked to obtain written estimates from a few licensed contractors of your own choosing. Regardless of the procedure, the policyholder has the final say in contractor selection. It may even be a good idea to seek out a good contractor ahead of needing one. Local BBBs have resources to guide you in this process.
  • Your repair/settlement checks may also include a third party, your mortgage company. This is to protect the insurance company’s investment in repairing your home. After you file your claim, contact your mortgage company to find out how to get settlement checks endorsed and deposited.
  • Especially for extensive repair work, payment is often done in stages as work is completed. There may be required inspections of the work prior to the release of funds.
  • If you plan material or other types of upgrades in the repair process, you may end up paying for the cost differences out of pocket. Discuss these changes with your insurer ahead of time so that you understand what is covered under your policy and what may be a personal expense.
  • If you find additional damages following the claims inspection, notify your insurer immediately. This is somewhat common when water or structural-related damages occur.

SETTLEMENT RIGHTS

  • You have the right to negotiate the settlement. If you’re having a difficult time with the adjuster, contact the company directly and ask to speak with the consumer services department or the claims division manager. If you still find the settlement unacceptable, follow the appraisal procedure outlined in the insurance policy. Most appraisal procedures work by you hiring an independent appraiser at your expense. Once the appraiser reaches an agreement, the claim is settled at that amount.
  • If you feel that you’ve exhausted all efforts with the insurance company, contact the Ohio Department of Insurance Consumer Hotline or call 1-800-686-1526. The department, which regulates all insurance agents and companies within the state, will provide you with information and advice on how to proceed.
  • If you still can’t reach an agreement, you always have the option of seeking outside legal advice. Remember, you are responsible for these legal fees, but by obtaining legal counsel, you sacrifice the ability to represent yourself directly with the insurance company. All future correspondence regarding the claim is then handled through your attorney.

CLAIM FACTS

In the five-year period, 2010-14, 7% of US insured homes had a claim. Wind and hail accounted for the largest share of claims, with 3.1% of insured homes having such a loss.

Homeowners insurance claims frequency

  • Homeowners claims related to wind or hail are the most frequent; the costliest are related to fire and lightning.
  • About one in 15 insured homes has a claim each year.
  • About one in 30 insured homes has a property damage claim related to wind or hail each year.
  • About one in 55 insured homes has a property damage claim caused by water damage or freezing each year.
  • About one in 215 insured homes has a property damage claim due to theft each year.
  • About one in 265 insured homes has a property damage claim related to fire and lightning.
  • About one in 1,000 homeowners policies has a liability claim related to the cost of lawsuits for bodily injury or property damage that the policyholder or family members cause to others.

Source for claims facts: III calculations, based on ISO, a Verisk Analytics company, data for homeowners insurance claims from 2010-14.

ADDITIONAL RESOURCES

Updated: April 7, 2017
Posted: December 5, 2015

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