Fire insurance claims can quickly become complicated, and there is a lot at stake. An insurance claim should help you recover and rebuild, but there are many mistakes along the way that could lead to a shortfall in funds or even having your claim denied outright.
Organizing your insurance claim and making sure the process is as smooth as possible will not only help you through what could be an emotional time but will also help your long-term finances.
Following these steps will help make your house fire insurance claim go smoothly and may help you negotiate a fair settlement from the insurance company.
Get Guidance Early in the Process
One way you can make your claim easier is to get guidance early on in the process. When an insurance adjuster comes onto your case, it’s important to realize that they are paid by the insurance company, whether they’re a direct employee or a third-party contractor. They may be looking to mitigate the company’s losses in order to secure further work.
For major claims such as a total loss, it often makes sense to hire an insurance lawyer. They can help explain your policy, demystify the claims process, and negotiate with the insurance company.
Guidance from a professional can be invaluable when you are going through the emotional recovery process as well. In the aftermath of losing your home, dealing with the complexities of a home insurance claim can be incredibly demanding, and you are best served with the help of an attorney experienced in wildfire litigation. For example, the Cerro Grande fire settlement in New Mexico was $115 million after intense litigation and negotiations.
Understand Your Coverage
When you make a claim, one of the first things you should do is request your long-form policy, with all the details about your coverage. The more you know about your policy, the better you’ll be able to assess the insurance company’s offer.
One aspect of insurance policies that can lead to disappointment is misunderstanding Replacement Cost vs. Actual Cash Value. Homeowners looking to save on premiums might select Actual Cash Value coverage, which will only provide funds matching the depreciated value of the actual item based on its age and condition.
Replacement Cost coverage provides policyholders with enough funds to buy the same item at present-day prices. The difference can be important. If you paid $1,000 for a couch five years ago, Replacement Cost coverage would give you enough money to buy the same couch today. Actual Cash Value coverage might provide only a couple hundred dollars, which you might expect to get from selling a five-year-old couch with all its wear and tear.
Prepare a Budget and Savings for Recovery
Even with a robust insurance policy, a fire in your home will come with its expenses, both immediate and long-term. First of all, your policy comes with deductibles – an amount you have to pay before your insurance kicks in. It helps to save an emergency fund that covers your deductibles, and because they are predictable and delineated in your policy, you should be able to plan for them.
You will also face immediate expenses such as shelter, takeout, additional transportation costs, and storage. These costs are covered under the Additional Living Expenses portion of your insurance, but you may have to pay for them out of pocket before the insurance company will reimburse you.
Don’t Accept an Offer that You Know Is Unfair
During the insurance claim process, either you or the insurer will compile a Schedule of Loss that lists your lost belongings. The insurance adjuster will evaluate the structural damage to your home. They may do this on their own or hire a contractor to evaluate the repairs that need to be made. With this information, they will recommend how much the insurance company should pay.
The insurance company’s initial offer does not have to be final. In some cases, it may even be meant as a jumping off point for negotiations. It’s important to review this offer and see where you might be entitled to more.
This is where understanding the exact terms of your policy, or getting advice from an insurance lawyer who does, becomes important. When you know what you’re entitled to under your policy, you have a better understanding of whether or not an offer is fair.
Signing Off on Your Proof of Loss Prematurely
Your Proof of Loss or is an itemized list of all the expenses (such as rebuild costs, contents that need to be replaced, etc.) incurred over the course of the claim. There can be pressure to sign off on a final Proof of Loss in order to progress with your insurance claim or release advanced funds, but you should be able to move forward with an interim Proof of Loss.
Giving yourself more time to complete your Proof of Loss can help you avoid forgetting any necessary items.