An In-Depth Explanation of Homeowners Insurance Claims – This article is all about home owners claims so whether you’re experiencing one right now or you just want to be prepared for if one happens I’m gonna walk you through the important part of what you can do to make your homeowners Insurance claim as simple as possible. So let’s dig right in! What we’re gonna learn this article is pretty simple. We’re gonna start with property versus liability, two different kinds of coverage that exist on your homeowners policy.
An In-Depth Explanation of Homeowners Insurance Claims
Then we’ll talk about what to do right when a claim happens. Your first decisions, the first things to do.
We’ll talk about a super important person in the process> the claim adjuster, and finally we’ll walk through how a claim goes and you can see the different parts of it and who does what, those kinds of things. First off though, a tiny disclaimer. This article is meant to provide very general advice.
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I am in no way confirming details about your specific insurance policies cause I don’t have them in front of me. Those conversations should happen between you and your insurance advisor. So pretty obvious but just wanted to throw that out right at the beginning. Ok let’s talk first about property versus liability, some basic insurance education here. Property coverage is when bad things happen to your stuff.
In a homeowner scenario that’s your house, your stuff inside your house, your other structures (your shed, your detached garage, pool, any of those kinds of things. That is your stuff and that is Property Coverage.
Liability Coverage is when bad things happen to other people because of you. So something bad happened to somebody, they got hurt or whatever. That is your liability and that’s why you have Liability Coverage on your auto policy, in your homeowners policy and, if you’re a business owner, you have general liability coverage as well.
This is coverage for when bad things happen to other people because of you. So I wanna stop right now and I just want to say, if you want to learn about liability claims please read this article. I didn’t want to make this article too long and so the rest of this article is all about Property Coverage, coverage for bad things that happened to your stuff.
Alright, so you had a claim happen. Maybe you had a fire. Maybe a tornado came through.
Maybe you had water damage, a burst pipe for example. Those are the most common ones but there’s lots of different kinds of claims. Something bad has happened to your house. What’s the first thing to do?
Well, I’m gonna start with the no-brainer, you know, call 911.
If your house is on fire or something like that it’s not the time to worry about your insurance coverage.
Right now you want to make sure that you mitigate the damage and that you get the professionals in to take care of it. So you’re gonna call 911 and that’s the first thing your gonna do. If it is safe, stop further damage. The best example of this is you should know where your water shutoff valve is in your house.
Oftentimes water claims become much much worse because someone didn’t know how to to turn off the water in their house and so it continued to pour out of the burst pipe and caused lots lots more damage.
So if it’s safe go ahead and stop further damage. That could be turning off the main water pipe in a fire situation, that could be getting your fire extinguisher and attempting to put the fire out. Ok, so call 911 at the very beginning, obviously, and then if it’s safe go ahead and stop further damage with all those things I just said. Finally, make sure you document everything.
So take pictures, take videos, make sure to have evidence of what happened because the claim adjuster that I’m about to talk about is going to ask for evidence and the more you have, the better off you’re gonna be throughout the claims process.
Ok so now you’re gonna call a remediation specialist. This is someone who is going to clean up the damage. A fire and water damage service specialist you probably have one in your town if you don’t you have one in the next closest larger town and you’re gonna hire these folks to clean up the mess.
But I want to point out right now a rookie mistake.
Something that people do all the time and it totally makes the process so much worse. That is hiring the wrong restoration service. These folks not only come in and clean up your house but oftentimes they are going to become the general contractor who helps to rebuild your house as well or fix the damage that happened.
So you’re gonna have a relationship oftentimes with these restoration folks from the very beginning to the very end of your claim experience. They’re gonna be doing the work and so if you hire the wrong folks it really really creates a problem.
What I suggest is to ask your insurance agent who they have used before.
Insurance agents have relationships with restoration folks and they know who’s good and who’s not. If you don’t have an insurance agent go out to Yelp, go out to whatever reference spaces out on the web and make sure that the people you hire get positive reviews from other local folks in your area. If somebody showed up and knocked on your door and you’ve never heard of them before or they don’t have any reviews online, that’s a red flag and they create could create a serious problem for your process. So definitely hire the right restoration folks based on referrals.
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Ok so when everything is settled and you know it’s not an emergency anymore, it’s time to call your insurance company. That’s your insurance agent or maybe that’s your insurance company itself. You’re gonna make a phone call to them and tell them about the claim.
Pretty simple right and when you call in you’ll likely get a general person, someone who doesn’t necessarily have expertise in the claims process. They may not be able to answer a whole bunch of questions for you but they’ll be collecting information from you.
The information you want back from them is is fairly simple. You want a claim number, this is going to drive a lot of the future conversations you have about this claim. You would love to have an adjuster’s contact information.
This is a person so they would say “Betty Sue” and they give you her phone number. A lot of times they will not have an adjusters contact information yet in that first call.
But you can ask for it and see if they have it and if they do that’s super awesome. Then ask when you can expect a call from the adjuster. I always say in claims experiences you want to know when the company is supposed to do the next thing. Then if they don’t do it at the time they say they were going to do it, that is when you contact them and say, “hey you said you would do you know so and so at this time it hasn’t been done yet.
I was just wondering how things are going.
That way you don’t come off as being really needy or any of that but the same time you make sure that you’re being taken care of like you should. So this is the first opportunity to do this: asking when you can expect a call from the adjuster?.
If they say in the next 24 hours don’t call the company two hours from now and say, “hey I haven’t got a call from the adjuster. What’s going on?” Give them the time that they said it would take but don’t give them more.
If that phone call doesn’t come in the 24 hours that they say they’re going to call in, that’s the time to give them a call and say, “hey I need to speak with the claims adjuster.” Speaking of the claims adjuster, here is our claims adjuster. This individual is your new best friend. The reason why is this is the company’s representative that makes claim decisions. Decisions like whether certain things are covered.
How much coverage there is. So this person is super important and a super important relationship to take care of.
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That’s why I say be nice to this person. It is amazing to me how many people are unkind to their claims adjusters. The claims adjuster from the company calls me and says, “hey Jeremy you know this person is is really being a jerk and I’m trying to help him out but here’s the situation.
And I gotta tell you, life is like this, I mean this is a general life lesson. You’re never going to get the best from someone if you’re treating them poorly. So you know be nice to this person. They have they have a huge role in the process.
Ok this next slide that I’m gonna throw up here is one of the most important pieces of this article.
This is what creates a visual for you that really explains exactly how a claim happens. So you have a claim happen. I’ve got the house with fire as the example here. There are two parallel paths that happened throughout the process. The first involves the insurance company Your insurance company is obviously going to be involved if there’s damage to your house but the other one you don’t think about as much is the contractors.
I mentioned the remediation folks at the beginning of this aticle and they may become your general contractor throughout the process or maybe you have someone you know who does framing or does dry wall or does different kinds of plumbing or whatever. If you have those folks you are usually, with most companies, allowed to hire whomever you want. But most of the time the remediation folks play that role because it’s easier and it works out better. So there are two parallel paths the insurance company and the contractor. Let’s start with the contractors first.
What is their job? Well, their job is to do the work.
So they are going to clean out the damage, fix everything that was wrong, and then rebuild whether that is putting carpet back down because it got wet or framing a room and drywalling it because it burned or whatever. It is the contractors that are local to you are going to be doing the actual work. It’s super important to understand because most people think it’s the insurance companies.
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They say, “hey why isn’t the insurance company getting this done?” It’s because the contractors are the one that are actually doing the work and the contractors are oftentimes what gets hung up if problems happen in the homeowners insurance situation it’s often the contractor who are the ones that are taking the longest. Because you know they have the work to do and they have to get the materials and the people and all that kind of stuff.
The insurance company is also involved but their role is fairly simple, they provide the money to fix the damage that happened. That’s really they’re only role.
You know they’re going to provide the money and the contractors are going to do the work. The contractors are going to be the ones you’re talking with the most, what color you want the paint, you know, all those kinds of things, The insurance company is going to provide the money. Two parallel paths are super important to understand. Ok so what are the some of the things that we need to think about while the property claimis happening? Well the first and most important is to determine if there is coverage.
The second is that, if there is coverage on the policy, the insurance company’s going to pay to make you whole again. Lets talk about determining if there is coverage.
Here’s how it’s going to work. The adjuster will likely visit your home and take photos. Sometimes they don’t come out but oftentimes they do.
They’re going to come out and take a look at what happened. They’ll asking a lot of questions. They’ll ask you how it happened, when it happened, what started it, all those kinds of things. Finally they are going to create a report that defines the Cause of Loss. The Cause of Loss is what drives insurance policies.
What made the claim happen? What was the root problem? If a tree fell what made the tree fall. Did someone with a chainsaw cut that tree down? That’s very different than if a wind storm came through and knocked that tree down.
So we’re looking all the way back to the very beginning even if it’s a domino effect of things that happened. What was the original thing that happened? That’s called the Cause of Loss. Why is the cause of loss so important? Well when you look at the cause of loss plus the terms of your insurance policy (which is different for all homeowners policies) you are going to get whether your loss is covered or not covered and that’s the heart of it all.
Whether it’s covered or not covered has everything to do with the cause of loss plus the terms of your insurance policy. So many times the terms of your insurance policy is just all these legalese stuff inside of your insurance policy.
So that’s where some trust happens when you hire your insurance agent and choose a homeowner’s policy. You’re trusting them that it’s a solid policy and you’re certainly gonna find out in these kinds of scenarios. The cause of loss plus policy terms equals covered or not covered.
Let’s talk about how we figure out covered or not covered. There’s basically three different things that could happen. here.
The adjuster could conclude that the entire loss is covered. That’s the best-case scenario, the entire loss is covered.
They could conclude that parts of the loss are covered. The best example here is if a valve breaks in your house and that valve was rusted out or something like that and the water bursts everywhere. A lot of times they say well you know well the valve was old and faulty so we’re not going to replace the valve but we will replace all the damage that the water did after leaving the valve. So if it’s a $10,000 claim they’re gonna pay $9,000 and not paid the.
Wait that’s a bad example but you know, sometimes they they won’t cover certain parts of the loss because of the scenario and they will cover others. Then, finally, the loss is deemed not covered. They determined that the cause of loss combined with the policy terms showed that the lost was not covered. So three different ways that things can go.
Oftentimes it’s the entire loss, sometimes parts are covered & part aren’t and other times it’s not covered it all.
Ok so how does the coverage work? Well first of all you have a deductible. You chose a deductible. Oftentimes on homeowners’ policies I suggest a one thousand dollar deductible.
That’s to keep your premium down. Some people have $2,500, $5,000 deductible and other people have $500 deductibles. To me $1,000 deductible is proper most of the time. So you are going to pay the first thousand dollars associated with this claim. So if the claim is less than $1,000 or if the damage is less than $1,000 then there won’t be a claim because you won’t you won’t have gotten to your deductible limit.
If it is above that then you’ll pay the thousand bucks the insurance company will pay the rest.
Replacement cost versus ACV. There are lots of article out there about this. I’ve created a couple so I’m not going into big details on this topic but basically you want a replacement cost policy. This is going to replace things properly.
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ACV is going to subtract for depreciation so for everything that needs to be replaced the insurance company is not going to be giving you the complete amount of money that you need to replace that. So hopefully you have a replacement cost policy and not an ACV policy.
Finally as I mentioned before, Pay to Make You Whole. The insurance company is going to pay to replace the things that you lost.
If that means rebuilding your house completely then we’re going to rebuild your house completely up to the policy limits. If you have a policy that insures you for $180,000 and it’s gonna cost 250,000 to replace your house lots of insurance policies stopped at $180,000 you’re going to have to pay the extra $72K to get your house totally completely rebuilt.
Now many many solid policies have built-in systems to help deal with that, for example Guaranteed Replacement Cost or Extended Replacement Cost. But as best we can, we’re going to pay to make you whole up to the policy’s limits. We’re not gonna pay more then your policy provided for you, we’re gonna pay to make you whole.
Ok, so what things are covered? Just a quick reminder your house is covered, your stuff is covered, the things inside your house (with some limitations including jewelry, furs, firearms, money) personal property has lots of rules around it but in general your stuff is covered, other structures (this could be a pool or detached garage things of that nature) and finally oftentimes people does think about this but we’re gonna pay to put you in a hotel for a period of time or a long-term living situation if we’re completely rebuilding your house.
So additional living expenses or loss of use is paid by your insurance policy often times as well. So those four things are what are going to be covered in a property claim. That was quick, didn’t get too deep into into the details but gave you at least a basic understanding.
We covered property versus liability. Property coverages for your stuff. Liability coverage is for bad things that happen to other people because of you. We talked about what to do first , make sure you call 911, stop the problem if you can, and finally document, document, document. The adjuster is your best friend in this process, the person who will be making decisions at the insurance company about whether coverage is there or not there, What kinds of coverage exists, how payments get made, they cut the checks, this person is important.
So be nice to them. And how a claim goes down. I described different coverages and how you can see them, reminded you about your deductible and talked a little bit about what things are covered.
If you’ve never heard of a personal liability umbrella, additional liability coverage above and beyond liability coverage on your home and auto policy, this article will really help you with that.
All right, so now you’ve made it through all An In-Depth Explanation of Homeowners Insurance Claims. What’s next? Do me a speedy spare and tell us which tip you liked “the world’s largest” in the comments below right now.