| WHAT
TO DO AFTER A DISASTER
1. Make temporary repairs.
Make temporary repairs to prevent further weather related damage.
Cover holes in the roof, walls, doors and windows with plastic or
boards. Be careful not to risk your own safety in making the
repairs.
Save receipts for any material you
buy. Your insurance company will reimburse you for the cost.
Beware of building contractors that
encourage you to spend a lot of money on temporary repairs.
Remember that payments for temporary repairs are part of the total
settlement. If you pay a contractor a large sum for a temporary
repair job, you may not have enough money for permanent repairs.
Don't make extensive permanent
repairs until after the claims adjuster has been to your home and
assessed the damage.
Avoid using electrical appliances,
including stereos and television sets, that have been exposed to
water unless they've been checked by a technician.
2. Call your insurance agent or
insurance company.
Report the damage to your insurance
agent or insurance company representative. Ask questions such as:
Am I covered? Does my claim exceed my deductible? (Your deductible
is the amount of loss you agree to pay yourself when you buy a
policy.) How long will it take to process my claim? Will I need to
obtain estimates for repairs to structural damage?
3. Save receipts for additional
living expenses.
Most homeowners policies cover
additional living expenses such as food and housing costs,
telephone or utility installation costs in a temporary residence,
extra transportation costs to and from work or school, relocation
and storage expenses and furniture rental for a temporary
residence. Your insurance company will usually advance you money
for these expenses. The payments will be part of the final claim
settlement. Let your insurance company know where you can be
reached so that the claims adjuster can give you a check.
The maximum amount available to pay
for such expenses is generally equal to 20 percent of the
insurance on your home. So on a home insured for $100,000, up to
$20,000 would be available. This amount is in addition to the
$100,000 to pay for repairs or to rebuild your home. Some
insurance companies pay more than 20 percent. Others limit
additional living expenses to the amount actually spent during a
certain period of time, such as 12 months, instead of a maximum
percentage of the policy limit.
4. Preparing for the adjuster's
visit.
The claims process may begin in one
of two ways.
- Your insurance company may send
you a claim form, known as a "proof of loss form,"
to complete.
- An adjuster may visit your home
first, before you're asked to fill out any forms. (An adjuster
is a person professionally trained to assess the damage.)
Usually, the more information you have about your damaged home
and belongings the faster your claim can be settled.
Major disasters make enormous
demands on insurance company personnel. Your adjuster generally
will come prepared to do a thorough and complete study of the
damage to your home. However, the large number of claims may place
time restrictions on adjusters forcing them to "scope the
loss." If your adjuster doesn't make a complete evaluation of
the loss on the first visit, try to set up an appointment for a
second visit.
Be sure to keep copies of lists and
other documents you submit to your insurance company. Also keep
copies of whatever paperwork your insurance company gives you.
Personal
Belongings
- Make lists of the damaged items.
Include the brand names and model numbers of appliances and
electronic equipment. If possible, take photographs of the
damage. Don't forget to list items such as clothing, sports
equipment, tools, china, linens, outside furniture, holiday
decorations and hobby materials.
- Use your home
inventory or put together a set of records - old receipts,
bills and photographs - to help establish the price and age of
everything that needs to be replaced or repaired.
- If your property was destroyed
or you no longer have any records, you will have to work from
memory. Try to picture the contents of every room and then
write a description of what was there. Try also to remember
where and when you bought each piece and about how much you
paid.
- Don't throw out damaged
furniture and other expensive items because the adjuster will
want to see them.
Structure of
Your Home
- Identify the structural damage
to your home and other buildings on your premises, like a
garage, toolshed or in-ground swimming pool.
- Make a list of everything you
would like to show the adjuster when he or she arrives. This
should include cracks in the walls, damage to the floor or
ceiling and missing roof tiles. If structural damage is likely
even though you can't see any signs of it, discuss this with
your adjuster. In some cases, the adjuster may recommend
hiring a licensed engineer or architect to inspect the
property.
- Have the electrical system
checked. Most insurance companies pay for such inspections.
- Get written bids from reliable,
licensed contractors on the repair work. The bids should
include details of the materials to be used and prices on a
line-by-line basis.
Public Adjusters
- Your insurance company provides
an adjuster at no charge to you. You also may be contacted by
adjusters who have no relationship with your insurance company
and charge a fee for their services. These are known as public
adjusters. You may use a public adjuster to help you in
settling your claim.
- Public adjusters may charge you
as much as 15 percent of the total value of your settlement
for his or her services. The fee isn't covered by your
insurance policy. Sometimes after a disaster, the percentage
that public adjusters may charge is set by the insurance
department.
- If you decide to use a public
adjuster, first check his or her qualifications by calling
your state
insurance department. Ask your agent, a lawyer or friends
and associates for the name of a professional adjuster they
can recommend. Avoid individuals who go from door to door
after a major disaster unless you are sure they are qualified.
HOW
TO DETERMINE THE
SETTLEMENT AMOUNT
The settlement amount depends on
which type of policy you have. Having inadequate
insurance can affect the settlement amount.
1. The Difference between
Replacement Cost and Actual Cash Value
Replacement cost is 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, wear and tear and
other factors. An actual cash value policy pays the amount needed
to replace the item minus depreciation.
Suppose, for example, a tree fell through the
roof onto your eight-year-old washing machine. If you had a
replacement cost policy for the contents of your home, 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 a percentage of the cost of a new washing machine because a
machine that has been used for eight years would be worth less
than its original cost. Suppose, also, that the tree damaged your
15-year-old roof so badly that it had to be completely replaced.
If you had a replacement cost policy, the insurance company would
pay the full cost of installing a new roof. If you had an actual
cash value policy, it would pay a smaller percentage of the cost
of replacing it.
2. Extended and Guaranteed Replacement Cost
Extended Replacement Cost: If your home was damaged beyond
repair, a typical homeowners policy will pay to replace your home
up to the limit of the policy. Where the value of your
insurance policy has kept up with increases in local building
costs, a dwelling like the one that was destroyed generally can be
rebuilt for an amount that's within the policy limit.
However, some insurance companies offer a replacement cost policy
that will pay a certain percentage over the limit to rebuild your
home - 20 percent or more, depending on the insurer - so that if
building costs go up unexpectedly, you will have extra funds to
cover the bill.
Guaranteed Replacement Cost: Sometimes after a
widespread disaster, a large demand for construction workers and
materials drives up prices. A few insurance companies still
offer a guaranteed replacement cost policy that pays whatever it
costs to rebuild your home as it was before the disaster.
But neither a guaranteed or extended replacement cost policy will
pay for a house that's better than the one that was destroyed.
3. Mobile Home Policies
If you own a mobile home, you may have a policy based on
replacement cost, actual cash value or, in a few cases, a
"stated amount." With a stated amount policy, the
maximum amount you receive if your home is destroyed is the amount
you agreed to when the policy was issued. The depreciation
in the value of your home is not considered in the settlement.
WHAT'S
COVERED BY A TYPICAL HOMEOWNERS POLICY
The following are general topics regarding
insurance coverage:
1. Trees and Shrubbery
Most insurance companies will pay for the
removal of trees that have fallen on your home. They may pay to
remove the trees that have fallen and haven't caused damage to
your home or other insured structure. They usually won't pay to
replace trees or shrubbery that have been damaged in a storm.
2. Water Damage
Homeowners policies don't cover flood damage but
they do cover other kinds of water damage. For example, they would
generally pay for damage from 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 as to whether it is covered.
3. Compliance with Current Building Codes:
Building codes require structures to be built to
certain minimum standards. In areas likely to be hit by
hurricanes, for example, buildings must be able to withstand high
winds to reduce the risk of hurricane damage. If your home was
damaged and it was not in compliance with current local building
codes, you may have to rebuild the damaged sections according to
current codes. In some cases, complying with the code may require
a change in design or building materials and may cost more. If you
live in an area likely to be flooded, you may have to comply with
federal codes which require buildings to be raised above flood
level. Generally, homeowners insurance policies won't pay for
these extra costs. However, some insurance companies
offer an endorsement that pays for these extra costs while some
insurance companies offer an endorsement that pays a specified
amount toward such changes. (An endorsement is a form attached to
an insurance policy that changes what the policy covers.)
For
more information about the coverage provided by a typical
homeowners insurance policy...
HOW
THE PAYMENT PROCESS WORKS
The first check you get from your insurance
company is often an advance, not a final payment.
If you're offered an on-the-spot settlement, you
can accept the check right away. Later on, if you find other
damage, you can "reopen" the claim and file for an
additional amount. Most policies require claims to be filed within
one year from the date of disaster.
When both the structure of your home and your
personal belongings are damaged, you generally get two separate
checks from your insurance company. You should also receive a
separate check for additional living expenses.
1. Structure
If your home is mortgaged, the check for home
repairs will generally be made out to you and the mortgage lender.
As a condition of granting a mortgage, lenders usually require
that they are named in the homeowners policy and that they are a
party to any insurance payments related to the structure. The
lender gets equal rights to the insurance check to ensure that the
necessary repairs are made to the property in which it has a
significant financial interest.
This means that the mortgage company or bank
will have to endorse the check. Lenders generally put the money in
an escrow account and pay for the repairs as the work is
completed. You should show the mortgage lender your contractor's
bid and let them know how much the contractor wants up front to
start the job. Your mortgage company may want to inspect the
finished job before releasing the funds for payment.
Some construction firms require you to sign a
form that allows your insurance company to pay the firm directly.
Make certain that you're completely satisfied with the repair work
and that the job has been completed before signing any forms.
Remember, you won't receive a check for the repair job. The firm
will bill your insurance company directly and attach the
"direction to pay" form you signed.
2. Personal Belongings
If you don't get a separate check from your
insurance company for the contents of your home, the lender should
release the insurance payments that don't relate to the dwelling.
It should also release funds that exceed the balance of the
mortgage.
State bank regulators often publish guidelines
for banks to follow after a major disaster, setting out how these
and other matters should be handled. Contact state offices to find
out what these guidelines are.
If you have a replacement cost policy for your
possessions, you normally need to replace the damaged items before
your insurance company will pay you the replacement cost.
If you decide not to replace some items, you
will be paid their actual cash value. You don't have to decide
what to do immediately. Your insurance company will generally
allow you several months from the date of the cash value payment
to replace the item. Find out how many months you are allowed.
Some insurance companies supply lists of vendors that can help
replace your property.
3. Additional Living Expenses
Make sure the check for additional living
expenses is made out to you and not your bank or mortgage lender.
This money has nothing to do with repairs to your home and you may
have difficulty depositing or cashing the check if you can't get
the mortgage lender's signature.
4. What If I Don't Rebuild ?
If your home was destroyed, you have several
options:
- Rebuild your home on the same site.
- Sell the land your old home was built on and
build in a different place.
- Rent a home rather than rebuild the one that
was destroyed.
If you decide not to rebuild, the settlement
amount depends on state law, what the courts have said about this
matter and the kind of policy you have. Read your policy carefully
if you decide not to rebuild and find out from your insurance
agent or company representative what the settlement amount will be
based on.
A similar rule applies to repairs. Suppose you
decide to change the kitchen flooring materials when you rebuild.
If you replace your expensive floor with materials that are
cheaper but more practical, you are not entitled to the difference
in cash. Unless the cost of repairs is a small amount, your
insurance company may initially pay you a sum equal to the actual
cash value. It will withhold the balance of the full replacement
cost amount until after the repairs are completed.
WHAT
TO DO IF YOU DON'T AGREE WITH THE SETTLEMENT
1. Talk to your agent or the claims manager
at your insurance company.
Explain your side of the matter. Provide copies
of supporting documents. Also, send a letter and documents to the
claims executive at the insurance company's headquarters whose
address is usually found on the first page of the policy.
2. Call the National Insurance Consumer
Helpline.
If after hearing from your insurance company's
claims executive, you still feel your claim hasn't been handled
properly, call 800-942-4242. It is a toll-free consumer
information telephone service sponsored by the insurance industry.
Trained personnel and licensed agents are available to assist
consumers who have complaints. The Helpline operates Monday -
Friday, 8:00 a.m. - 8:00 p.m. ET.
3. Contact your state
insurance department.
Explain the reasons for the disagreement to a
consumer services representative at the department. He or she will
discuss the matter with your insurer and help to resolve any
difference so the claim can be settled.
4. Consult an attorney.
The American
Bar Association notes that many situations involving legal
matters can be handled by consumers on their own, without a
lawyer. If you do hire an attorney, provide them with a copy of
your insurance policy and all other relevant documents. If the
insurance company has made a settlement offer, tell your attorney
about it and ask if he or she believes that a lawsuit will help
you get a larger settlement, net of the attorney's fees. Attorneys
usually work on an hourly rate, but with cases involving injuries,
they generally work on a contingency basis. Get your attorney's
fee structure in writing before you decide to pursue the case. If
you hire an attorney, you will no longer talk directly with the
insurance company. You can remain current on the progress of your
claim by insisting that you receive copies from your attorney of
all correspondence involving your case. Your attorney must have
your agreement before committing to any settlement.
WHEN
THE CLAIMS FILING PROCESS IS COMPLETE
After your claim has been settled, take time to
re-evaluate your homeowners insurance coverage to make sure you
have adequate protection.
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