Settling insurance claims after a disaster | III

what you need to know about

  • how to file a claim
  • how the claim process works
  • what is covered and what is not
  • first steps

    contact your agent or company immediately. find out:

    • if the damage is covered by the terms of your policy
    • how long you have to file a claim
    • if your claim exceeds your deductible (the amount of loss you agree to pay before insurance kicks in)
    • how long it will take to process the claim
    • if you will need estimates for repairs
    • Make Temporary Repairs: Take reasonable steps to protect your property from further damage. keep receipts for what you spend and send them to your insurance company for reimbursement. remember that payments for temporary repairs are part of the total settlement. therefore, if you pay a contractor a large sum for temporary repair work, he may not have enough money for permanent repairs. Beware of contractors who ask for a lot of money up front and contractors whose bids are too low – they could cut corners and do a poor job. do not make extensive permanent repairs until the claims adjuster has assessed the damage.

      Reading: How long to file insurance claim after hurricane

      If you need to move, keep your receipts: If you need to find other housing while your home is being repaired, keep track of your expenses. Homeowners insurance policies provide coverage for the cost of additional living expenses if your home is damaged by an insured disaster.

      Prepare for adjuster visits: Your insurance company may send you a proof of loss form to complete, or an adjuster may visit your home first. (An adjuster is a person professionally trained to assess damage.) In any case, the more information you have about your damaged property (a description of the item, the approximate date of purchase, and how much it would cost to replace or repair it), the faster your claim can usually be resolved.

      • To substantiate your loss, prepare an inventory of the damaged or destroyed items and give a copy to the adjuster along with copies of receipts. do not throw away damaged items until the adjuster has visited them. You should also consider photographing or videotaping the damage. If your property was destroyed or you no longer have records, work from memory.
      • Identify structural damage to your home and other structures, such as a garage, tool shed, or in-ground pool. Make a list of everything you want to show the adjuster, such as cracks in the walls and missing tiles. You should also check the electrical system. most insurance companies pay for these inspections.
      • obtain written bids from licensed contractors. Bids must include details of materials to be used and line-by-line prices. this makes adjusting the claim faster and easier.
      • Keep copies of the lists and other documents you send to your insurance company. also keep copies of any paperwork your insurance company gives you, and record the names and phone numbers of everyone you talk to.
      • Flood damage is excluded from standard homeowners and renters insurance policies. However, flood coverage is available as a separate policy from the federal government’s National Flood Insurance Program (NFIP) and from some private insurers. The NFIP provides coverage of up to $250,000 for the structure of the home and $100,000 for personal possessions. flood insurance claims must be filed with your homeowners insurance company.

        factors that determine the amount of settlement you get

        policy type

        Replacement Cost and Actual Cash Value: Replacement cost policies provide you with the dollar amount needed to replace a damaged item with one of similar type and quality without deducting depreciation (the decrease in value due to age, wear and other factors). actual cash value policies pay the amount needed to replace the item less depreciation.

        Suppose, for example, a tree falls through the roof onto your eight-year-old washing machine. With a replacement cost policy, the insurance company would pay to replace the old machine with a new one. If you had an actual cash value policy, the company would pay only part of the cost of a new washing machine because a machine that has been used for eight years is worth less than its original cost.

        Guaranteed Extended Replacement Cost: If your home is damaged beyond repair, a typical homeowners policy will pay to replace it up to the policy limits. If the value of your insurance policy has kept pace with increases in local construction costs, a similar home can usually be built for an amount within the policy limits.

        With an extended replacement cost policy, your insurer will pay a certain percentage over the limit to rebuild your home (20 percent or more, depending on the insurer), so if construction costs unexpectedly increase, you’ll have funds additional to cover the bill. Some insurance companies offer a guaranteed replacement cost policy that pays whatever it costs to rebuild your home as it was before the disaster. but neither type of policy will pay for materials more expensive than those used in the structure that was destroyed.

        Mobile Home, Set Amount: If you own a mobile home, you may have a set amount policy. With this policy, the maximum amount you receive if your home is destroyed is the amount you agreed to when the policy was issued. If you choose the amount listed, update your policy annually to make sure the amount covers the cost of replacing your mobile home. check with local mobile home dealers to find out what prices similar homes are now selling for.

        policy limits

        Most insurance policies provide adequate coverage because they include an inflation protection clause to keep up with increases in local construction costs. If you have replacement cost coverage, your insurance company will pay the full cost of repairing or replacing the damaged structure with a building of “like kind and quality.” in other words, if you had adequate insurance and lived in a three-bedroom ranch. Before the disaster, his insurance company would pay to build a similar three-bedroom ranch.

        Most insurance companies recommend that a home be insured for 100 percent of the replacement cost so that you have enough money to rebuild if your home is totally destroyed.

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        However, you may not be fully covered if you’ve made significant improvements to your home, such as closing off a porch to create another room or expanding your kitchen, without notifying your insurance company of the changes at the time.


        temporary housing expenses

        If you can’t live in your home because of the damage, your insurance company will advance you money to pay reasonable additional living expenses. the amount available to pay such expenses is generally equal to 20 percent of your home insurance. this amount is in addition to money for repairs or to rebuild your home. some insurance companies pay more than 20 percent. others limit additional living expenses to the amount spent over a certain period of time.

        Typically covered items include the costs of eating out, rent, telephone or utility installation at a temporary residence, and additional transportation costs. insurance policies often discuss additional living expenses under the heading loss of use.

        rebuilding and making repairs

        If your home was destroyed, you have several options.

        • you can rebuild a new house on the same site.
        • Depending on state law, you can sell the land and build or buy a house in a different place, even in another state.
        • You can decide if you prefer to rent.
        • If you decide not to rebuild, the settlement amount depends on state law, what the courts have said about this matter, and the type of policy you have. find out from your insurance agent or company representative what the settlement amount will be based on.

          As for repairs, if you change categories, for example, if you replace an expensive hardwood floor with one that uses a cheaper product, you are not entitled to the difference in cash.

          other factors

          Compliance with Current Building Codes: Building codes require that structures be built to certain minimum standards. in hurricane-prone areas, for example, buildings must be able to withstand high winds. If your home was damaged and did not meet current local building codes, you may need to rebuild damaged sections to current codes.

          In some cases, meeting code may require a change in design or materials of construction and may cost more. Generally, homeowners insurance policies will not pay for these additional costs, but insurance companies offer an endorsement that pays a specific amount for such changes. (An endorsement is an addition to an insurance policy that changes what the policy covers.) The information related to this coverage is found under the ordinance or law in section i part of your policy exclusion.

          Use of Public Adjusters: Your insurance company provides an adjuster free of charge. You may also be contacted by adjusters who have no relationship with your insurance company and charge you a fee for their services. They are known as public adjusters. If you decide to use a public adjuster to help you settle your claim, this service could cost you up to 15 percent of the total value of your settlement. Sometimes after a disaster, the insurance department sets the percentage that public adjusters can charge. If you decide to use a public adjuster, first check references and qualifications by contacting your state’s Better Business Bureau and Department of Insurance (see back cover for contact information). Also contact the National Association of Public Insurance Adjusters ( or the National Association of Independent Insurance Adjusters (

          compensation for damages

          Vehicles: If your car was damaged and you have comprehensive coverage under your auto insurance policy, contact your auto insurance company. If your car was so badly damaged that it’s not worth repairing, you’ll receive a check for the actual cash value of the car—what it would have been worth if it had been sold just before the disaster. Kelley’s Blue Book ( or other similar publications can give you an idea of ​​your car’s value.

          Trees and Shrubs: Most insurance companies will pay up to $500 for the removal of trees or shrubs that have fallen on your home. They will also pay for damage caused to the insured structures and their contents up to the policy limits, but will not pay for removing fallen trees causing a mess in your yard.

          Water: While homeowners policies don’t cover flood damage, they do cover other types of water damage. for example, they will generally pay for damage caused by rain coming through a hole in the roof or a broken window, as long as the hole was caused by a hurricane or other disaster covered by the policy. if there is water damage, check with your agent or insurance company representative to see if it is covered.

          the payment process

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          Disasters can be very demanding on insurance company staff. Sometimes, after a major disaster, state officials ask insurance company adjusters to see everyone who has filed a claim before a certain date. when there are a large number of claims, the deadline may force some to make a first rough estimate. if the first evaluation is not complete, schedule an appointment for a second visit. The first check you receive from your insurance company is usually an advance. if you are offered a settlement on the spot, you can accept the check right away. later, if you find other damages, you can “reopen” the claim and submit an additional amount.

          Most policies require claims to be filed within one year from the date of the disaster.

          Some insurance companies may require you to complete and sign a proof of loss form. This formal statement provides details of your losses and the amount of money you are claiming and acts as a legal record. some companies waive this requirement after a disaster if you met with the adjuster, especially if your claim is not complicated.

          The choice of repair companies is yours. If your home was properly insured, you won’t have to settle for less than what you had before the disaster. make sure the contractor provides you with materials of the same quality. do not make permanent repairs until after the adjuster has approved the price. If you have received offers, show them to the adjuster. If the adjuster agrees to one of your offers, then you can begin the repair process. If the bids are too high, ask the adjuster to negotiate a better price with the contractor. adjusters can also recommend companies they have worked with before. Some insurance companies even guarantee the work of the companies they recommend, but such programs are not available everywhere. make sure contractors get proper building permits.

          If you can’t reach an agreement with your insurance company: If you and the insurance company’s adjuster can’t agree on a settlement amount, contact your agent or the insurance company. manager of the claims department of your insurance company. make sure you have figures to back up your claim for more money. If you and your insurance company still disagree, your policy allows for an independent assessment of the loss. In this case, both you and your insurance company hire independent adjusters who choose a mediator. the decision of any two of these three persons is binding. you and your insurance company each pay for your adjuster and share the other costs. however, disputes rarely reach this stage.

          Some insurance companies may offer a slightly different way to resolve a dispute called arbitration. When settlement differences are arbitrated, a neutral arbitrator listens to arguments from both sides and then makes a final decision.

          How you receive the money: When both the home and the contents of your home are damaged, you usually receive two separate checks from your insurance company. If your home is mortgaged, the check for home repairs will usually be written to you and the mortgage lender. As a condition of granting a mortgage, lenders generally require that they be named on the homeowner’s policy and that they be part of any insurance payments related to the structure. The lender obtains equal rights to the insurance check to ensure that necessary repairs are made to property in which it has a significant financial interest. this means that the mortgage company or bank will have to endorse the check. Lenders typically put the money in an escrow account and pay for repairs as the work is completed.

          You must show the mortgage lender your contractor’s offer and say how much the contractor wants up front to start the job. Your mortgage company may want to inspect the completed work before releasing funds for payment. If you don’t receive a separate check from your insurance company for your home contents and other expenses, the lender must release non-home insurance payments. You must also release any funds that exceed the mortgage balance. State banking regulators often publish guidelines for banks to follow after a major disaster. contact your state regulatory offices to find out what these guidelines are.

          Some construction companies want you to sign a payment instructions form that allows your insurance company to pay the company directly. the company will bill your insurance company directly and attach the form you signed. Please make sure you are completely satisfied with the repair work and that the work has been completed before signing any forms.

          If you have a replacement cost policy on your personal belongings, you typically must replace damaged items before your insurance company pays. if you choose not to replace some items, you will be paid their actual cash value. Your insurance company will generally allow you several months from the date of the cash value payment to replace the items and collect the full replacement cost. find out how many months you are allowed. Some insurance companies provide lists of providers that can help replace your property. some companies may supply some replacement items themselves.

          After your claim has been resolved and repair work is underway: Take the time to re-evaluate your homeowners insurance coverage. for example, was your home adequately insured? Did you have replacement cost coverage for your personal property? talk to your insurance agent or company representative about possible changes.

          additional resources

          download a pdf version of this brochure.

          Next Steps: Learn more about filing an insurance claim after a disaster.

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