If you live in the Midwest, chances are you’ve dealt with severe weather. Whether it was forecasted, or the all-to-common “30% chance of isolated thunderstorms” (which, let’s be honest, is just used to cover their backsides because they have no idea), a big storm has rolled through and has left you with damage to your home. Now what? If you have homeowners insurance, you now have the awesome chance to file an insurance claim. This process can be stressful, frustrating and time-consuming if not handled correctly. We would like to share with you what we’ve learned (sometimes the hard way) about navigating and negotiating a typical insurance claim. Using the following points can help make the process less stressful and frustrating. (We haven’t quite figured out the “time-consuming” piece but when we do we’ll let you know…)
The insurance claim process:
All typical insurance claims follow a common path. This is just a summary, we will get into further detail down below.
- Your property is damaged. This could be from a storm or someone driving into your house, etc. However, we’re going to focus on the storm this time around.
- You reach out to your insurance company and tell them you need to file a claim. If you wait for them to contact you, we wish you the best of luck.
- The insurance company sends out an inspector to look over and note the damage.
- The inspector files a detailed line item report to the insurance company specifying what needs repaired and what it’s going to cost.
- You receive a copy of the report and the insurance company issues you a check based on the current value of the items to be repaired, minus your deductible. (This is the ACV or Actual Cash Value)
- It is now your responsibility to find a contractor to do the repairs. You usually have about one year before the claim “expires” to do something.
- Once the repairs are complete, you send in the contractor’s invoices to the insurance company and they issue a check for what they have listed as the replacement value minus what they sent you in line 4. (This is the RCV or Replacement Cash Value)
Whew! That was quite the process and that’s just the summary! If it was as easy as following the above 7 steps then I could take more vacations! We’re now going to see where you need to watch out for common pit-falls.
A few things you should know before going in:
YOU are the homeowner. YOU pay the premiums. You have more power in this process than anyone else, including your contractor(s). If you see something that doesn’t look right or come across something you think should be covered, ASK! Still not sure? Get a second opinion.
Above, we talked about the inspector that actually does the site inspection. This person more than likely will not be your adjuster. Also, when a large storm comes through, insurance companies will hire third-party inspectors just to handle the sheer volume of claims. They may have 50 homes to visit in a two week time period. Sometime quantity takes precedence over quality.
Depreciation can be subjective. Some items, like roofing, have a standard lifetime rating and how much life is left can be figured relatively easily. Other items, like siding and windows, are left up to the inspector’s discretion. If you are planning on replacing everything, this may not seem like a big deal. However, until you receive that final check, all of the out of pocket expenses will be coming out of that initial check which is already smaller due to your deductible.
A standard insurance policy covers the amount to replace the damaged property. If the contractor bids the repair at less than the initial estimate, that’s all the insurance company will pay out. The same is true for contractor estimates that are higher than the original estimate (within reason). For example, your initial estimate from the insurance inspector come in at $10,000. This amount is based on current market averages for this type(s) of repairs. You have a contractor you’ve used on multiple occasions and enjoy a level of trust with them and decide to have them bid the job. After reviewing the damage, your contractor provides you with a bid for $12,500 for the same scope of repairs. The insurance company decides that this is reasonable and approves the increase. Sounds fair, right? It’s your home and you have the choice of contractor you want to use. However, let’s look at it from the other side. Now, your contractor looks at the damages and decides he can do the repairs for only $7,500. When you submit the estimate to the insurance company they will now only pay out $7,500. Because that’s what it costs to repair the damage to pre-damaged conditions. Since all contractors inevitably vary in pricing, the insurance company is flexible to a point when it comes to pricing but remember, it goes both ways.
So what is the best way to handle my insurance claim?
Glad you asked. It really depends on you. Sound like a cop-out? Let me explain.
There are 3 options to choose from:
- Handle the claim yourself.
- Hire a general contractor to do it for you
- Don’t fix anything and use the ACV check for a vacation
While option 3 sounds like a winner, let me explain why it can be a bad idea.
- Let’s be realistic, insurance companies don’t give away money for nothing. Their sole reason for existing is for this purpose.
- If you have a mortgage with a bank, chances are they will be named on your insurance claim as a beneficiary since technically they own part of the home. There’s a reason they require insurance and it’s to protect their investment. Nobody wants to go down that road.
- If you choose not to fix the damage and it hails/storms again, they won’t cover the damage. The initial damage may be small and may not cause problems in the long run, but the next one might and then you’re footing the bill for everything.
- If you want to sell the home at some point, the future buyer is going to want it fixed. Again, you’re footing the bill.
So that leaves options 1 and 2. To help make your decision, ask yourself these questions:
- How big is the scope of work? If it’s only your roof and will only have one contractor involved, you can probably handle that on your own. If it involves roofing, siding, windows, gutters, etc, it may be better to find a general contractor to handle all of the individual trades for you.
- How much time do you want to put into it? Be aware that a lot of time is spent just following up with the insurance company. This answer might come easier after talking with the adjuster and finding out how pro-active he/she will be.
- How can you know that your estimate has covered all of your damages? Keep in mind that inspectors can be extremely pressed for time and things may get missed. Also, what happens once the contractor starts work and finds additional issues that need addressed? If you’re handling it, it’s your responsibility to bring it to their attention.
You’ve decided to have a general contractor handle your claim? Great! Give us a call. We will meet you on site to go over the initial report, inspect the site ourselves for anything missed, and coordinate everything with the subcontractors as well as the insurance company. Sit back and relax with peace of mind knowing that everything that should be covered, is. Don’t worry about dealing with the insurance company, we’ll let you know if there is anything you need to do. We will also keep you in the loop on what is going on. It’s your home!
You’ve decided to handle it yourself? Also great! Still give us a call. We can bid the individual repairs as well and give you a solid estimate to give to the insurance company.
So that’s the short version of handling an insurance claim. Hopefully it has given you tools to use with your own claim whether you choose to use Lion Rinnovations to handle it or not. Remember, don’t be afraid to ask questions!
See something I missed or have any suggestions to add? Leave them in the comment section below!