No one wants to deal with their insurance company. But if your home has been damaged by a fire, flood, or natural disaster, your insurance policy is the best tool you have to rebuild your home and protect your family from financial burden.
However, it’s not always smooth sailing. Insurance companies are known to try and cut costs at homeowners’ expense, especially when natural disasters strike and they’re facing hundreds or even thousands of claims at once.
These are 5 of the most common problems that you should prepare for if you’re about to make a claim.
1) You’re Underinsured
An alarming 60% of households are underinsured, meaning their policies would not cover the full costs of rebuilding or replacing their belongings. When you’re underinsured, it means the limits on your coverage are too low, and you will have to pay out of pocket to replace your belongings or repair your home.
Don’t mistake a low offer from your insurance company for being underinsured. It’s important that you go over your policy and understand what you’re really entitled to.
Communicating with your insurance company should be one of your topmost priorities. You will have to contact your insurance company as quickly as possible when you experience a loss; failure to do so could jeopardize your claim.
Keep track of your subsequent communications with the insurance adjuster. It will help you stay on top of your claim’s progress.
3) Additional Living Expenses
Additional Living Expenses coverage compensates you for the cost of living in a hotel or rental while your home is repaired. You’re entitled to maintain your standard of living while repairs are done on your home. For example, the insurer should provide enough funds for you to rent a home or apartment of comparable size.
Another area of disagreement may arise around the date that your home is determined to be livable again. The insurer will insist that once repairs are finished, you can move back in. For personal reasons, you may want to delay that move. For example, your kids may be writing exams, or you may be completing a time-intensive project at work. Keep in mind that if your home is livable the insurer will likely stop paying Additional Living Expenses since you are willingly incurring extra costs.
4) Depreciation of Personal Property
A substantial part of your claim goes toward replacing personal belongings lost in the fire, such as furniture, clothing, electronics, etc. Many policies have something called Actual Cash Value coverage, which means that the insurer will compensate you based on the value of the item before the loss, rather than the purchase cost.
Personal belongings can depreciate quickly. For example, on average, furniture depreciates 20 percent each year, so you could be left with far less than you need to replace everything. If the insurer has applied Actual Cash Value, it’s worth looking at how much the insurer has depreciated each item and contesting their accuracy if you find a miscalculation.
5) Repair Costs
Insurers like to save money on claims. When they are getting an estimate for your claim, they will solicit bids from preferred contractors to complete the work. They base their offer to you on the lowest bid provided.
If you believe necessary repairs or materials costs haven’t been included, you may need to negotiate with the insurer about including them in the estimates.