3 Reasons Why Your Property Insurance Claim Is Underpaid – Today, we’re going to talk about property damage that is denied and underpaid for policyholders across Texas and the U.S. I’m here today to talk to you about the reasons why your insurance claim was most likely underpaid. We get phone calls all the time from people who have had weather-related losses to their homes or businesses.
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Why Your Property Insurance Claim Was Underpaid?
When I say weather-related losses, I’m talking about windstorms, hailstorms, tornadoes, wildfires: you name it, all of the items that are covered under your policy. And when you experience one of these losses, typically, you report your claim and the adjuster comes out, and the classic scenario is as follows.
They come out to your house, they look around your house or your building, and then they come in and they sit down with you at your kitchen table and they say, “Hey, Mr. Homeowner”, or “Mr. Small Business Owner, I’ve looked at this, and yes, you have experienced a Covered Loss.”
That’s kind of a term of art in the insurance business; Covered Loss means it’s compensable under the insurance policy. But they’ll say “Hey, I just didn’t see a whole lot of damage. I saw a little bit of wind damage or a little bit of hail damage, and I think it’s repairable.” And they go, “OK, I’m going to allow you X amount of dollars to repair your shingles or to repair your hail damage, but unfortunately, that’s below your deductible.”
So, what does below your deductible mean?
That means that you’re not getting a payment.
You have a $5000, $10,000, maybe a $20,000 deductible. They’re saying that your repairs are only $1200 and that’s all they’re going to pay you, and since it’s under the deductible, you get no payment. So, why would they do this? You think you’ve got damage.
You see all your neighbors with plenty of damage. Well, over the years, I’ve handled enough of these claims where I think I’ve figured out some reasons why they deny these claims. Number one is :
Adjuster is just too busy
We’ve learned through our experience that it takes the adjuster a lot more time to pay a claim than it does to deny a claim or underpay a claim.
And if they pay a claim, they’ve got to write a long, drawn-out estimate to rationalize to their boss why they paid you 20, 50, $60,000.
If they deny the claim or if they say, “It’s just under the deductible”, they can send you a two or three-page letter and say, “Here’s the $1200 I think you have in damage. We’re going to move on our way. Call us if you have any problems or questions.” It’s a lot faster. So, I think that sometimes claims get denied because the adjuster is just too busy to take the time to pay it.
Adjusters are compensated on their efficiency, not how much money they save the insurance company. They’re just compensated on how many files they can open and close in a week. So, let’s say it’s Friday, the end of the week and the adjuster’s trying to wrap stuff up.
Your claim may get denied when, in fact, it should have been paid or underpaid when it should have been paid.
Too far after a disaster
Another reason why claims are denied is, if you are too far after a catastrophic loss occurred, they will close what’s called the CAT period. What this means is, every insurance company sends out a catastrophe team after a large natural disaster. This means they send adjusters out to a region in the United States. They put them in hotels and they tell these adjusters to not come home until they’ve finished and they’ve adjusted all the claims.
And typically when they do this, they’ve got a large sum of money allocated and they’ve got all of these adjusters out there trying to pay claims, and then as they wrap up the catastrophic period, those adjusters go home and then the regular adjusters come back out. Well, when that happens, the CAT money is gone, and so, sometimes your neighbor who lives right next door, may have the same insurance company, they may have had their claim paid three months ago, whereas you make the claim and you just happen to fall outside the CAT period.
A different adjuster comes out and they deny your claim, or they underpay your claim. So, there’s really no method to the madness in terms of timing, so if you do experience a weather-related loss and you know you have damage, you need to go ahead and report that damage immediately so you can get adjusters and you can get the insurance company to look at your damage right after the storm.
Adjuster will assess the person who owns the policy
Another reason why claims get denied is the adjuster will size up the person with the policy. If it’s a small business owner or the individual that owns a home, they’re going to look at you and they’re going to think, “Hey is this person going to fight?” If they think you have a claim that’s marginal and they think that you’re not going to fight them, they’re going to make friends with you and convince you that you don’t have any damage, and they’re going to try to tell you that you’re under the deductible.
Again, they’re not doing it because they don’t like you. They’re doing it because they need to be efficient and they need to get onto the next claim.
So, what do you do if your claim has been underpaid? You need to get a second opinion. How do you get a second opinion?
There’s a number of professionals you can call. I would strongly recommend you calling a construction professional that understands what weather-related damage looks like, or call an attorney who has experience handling a weather-related claim. Those attorneys will have names and numbers of professionals who can go out and look at your property and give you a valid second opinion.
Once you have that second opinion, you’ll have an idea, assuming there is weather-related damage, of what the difference is between your second opinion, their cost to repair, and what the insurance company said the cost to repair would be. And once you have that, you can decide if you want to go hire a lawyer to make a claim against your insurance company for underpaying your claim.
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