If You Suffer Losses from a Storm or Natural Disaster, Make Sure You Get a Fair Insurance Settlement
Getting through a disaster is hard enough, but no one wants to run into trouble getting reimbursed for home damages
No matter how much we prepare, no one is ever really 'ready' when the big storms hit. They take a toll on our wallets and our lives. Insurance is supposed to be there to help during these tough times. But if you wait to contact your insurer, fail to keep records, or don't even know what your policy covers, you can be in for additional stress long after the disaster has made its mark.
If possible, prepare for the disaster before it hits
- Locate your insurance policy and keep it in a safe place. You don't want to have to look for it later. If a natural disaster is imminent, keep the policy with you.
- Review your insurance policy now to find out what is covered and how and where to report claims.
- If there isn't an imminent disaster, review your policy coverages and limits. You may wish to make changes or additions. You aren't typically able to increase or add coverages if a natural disaster is imminent, such as a predicted flood within a few days. So any changes that need to be made should be made well in advance.
- Make an inventory of your property and possessions. Nearly everyone has a smart phone these days and a detailed video of all possessions and help you get a fair settlement.
After You have suffered losses from a disaster
- Report your claim as soon as possible. Insurance companies get busy and take claims in the order received
- Get your claim number and write it down. Insurance companies can locate your file easiest by your claim number.
- When an adjuster surveys the damage, ask if he/she is an employee of the insurance company or an independent adjuster hired by your insurance company. If it's an independent adjuster, get the name of the company. Is the company authorized to make claim decisions and payments on behalf of your insurance company?
Always Keep Good Records for insurance purposes
When you file a claim, you should immediately start a notebook documenting contacts with your insurance company. List the date, time and a brief description of the exchange. If you need to file a complaint later, this information can be very helpful. If an adjuster says he or she will come and does not, write it down. If an adjuster is rude, write it down.
List your possessions when making your claim. If you don't have an inventory, you can always look through photos you have taken, such as from Christmas or a birthday, as supporting evidence. Without an inventory of your possessions, you may forget about things that were destroyed and not make a complete claim.
Get a repair estimate from a trusted local contractor to use as a guide in talking with your adjuster. Keep receipts from emergency repairs and any costs you incur in temporary housing, which may be reimburseable.
You may be entitled to money for up-front for living expenses, such as hotel costs, if your home becomes uninhabitable. Insurers are usually very good about these initial payments, while the media is focused on the hurricane aftermath. Most claims problems, if they arise, come later when bigger payments are sought.
Deciding Whether to File an Insurance Claim
If you have paid your insurance premium, you are entitled to coverage. But whether you file is up to you. If you have only suffered very minor damages, you may choose to pay your expenses rather than file a claim and risk a premium rate hike. Most rate increases from filing claims are fairly modest. But the more your claim, the more you can expect your rate hike, if any, will be. The number of claims you have also recently had can also affect your future premiums and whether your insurance company will drop you. For example, some insurers will drop you if you make a certain number of claims within a certain period of time.
What if the Insurance Claim is Denied or the Offer from the Insurance Company is Too Low?
If your claim is denied or you feel the offer is too low, demand that the company identify the language in your homeowners' policy that served as the basis for denying your claim or offering so little. This approach has a number of benefits:
- The company may be right and you may not know it. Once they pinpoint the appropriate language in the policy, you should be able to make this determination. For example, you may have $1,500 in damage, but the company could well point out that you have agreed to a $5,000 deductible.
- The company may have slipped new limitations into the policy and not adequately informed you. If you feel that you have been misled in this regard, it might be a good idea to consult an attorney. Some companies have introduced percentage deductibles that shift the burden back to consumers. These practices are acceptable so long as consumers are clearly given the option to select the level of coverage they want with fully informed consent.
- Another restriction new to many policies is a limit on replacement cost payments, which might come into play in the event that a home is totally destroyed. A typical cap is 20 percent above the face value of the policy. If costs surge because of the spike in demand in materials or labor from a major storm or if the state does not monitor price gouging sufficiently, this limit might apply. For example, if a home would cost $200,000 to replace and that amount was the limit on the policy, the insurance company would pay no more than 20 percent more, or $240,000. If the surge in construction costs due to extreme demand caused the price of replacing the home to jump to $300,000, the homeowner would be short $60,000.
- Once the insurance company tells you the reasons for its action, it cannot produce new reasons for denying payment or making a low offer at a later time. You have locked them in.
- If you review the policy and find that, under a reasonable reading, you think you are entitled to the full amount of your claim as you read the language they relied upon, you can possible win if you go to court. Courts consistently rule that if an insurance policy is ambiguous, the reasonable expectation of the insured party will prevail since the consumer played no part in writing the language of the insurance policy.
Filing a Complaint Against the Insurance Company
If you feel that the offer is too low or the claim denial is wrong, the best process for getting your complaint resolved is to file a complaint.
- Complain to more senior staff in the insurance company. Use the records you have kept since the claim process began. The more serious the insurance company sees that you are in documenting how you were treated, the more likely they will make a more reasonable offer.
- Complain to your state insurance department. All states will at least seek a response to your complaint from your company. A few states may actually intervene on your behalf with the insurance company in clear cases of bad claims handling. It is important to present your side of the story using your notes.
- See a lawyer. In addition to an award covering your claim, if your treatment was particularly bad, the courts in many states will allow additional compensation when the insurance company acted in "bad faith." Since insurance companies take your money in exchange for their promise to make you whole when disaster strikes, they must act in utmost good faith in performing that obligation.
- Remember to always be polite.
What is not Covered by a Homeowner's Insurance Policy?
Most homeowners' policies do not cover flood, earthquake, tree removal (except when the tree damages the house) or food spoilage from power failures. Some insurers use an "anti-concurrent causation" clause in their policies that, insurers allege, removes coverage for wind damage if a flood happens at about the same time. If an insurer uses such a clause to deny your claim, read the provision carefully to see if you think it is ambiguous. If so, see an attorney right away.
Do I Use the Same Methods for a Flood Insurance Claim?
The federal government underwrites flood insurance coverage, although insurance companies often service claims. Follow the same procedures as above, except direct complaints to the Federal Emergency Management Agency (FEMA), the government agency responsible for running the federal flood insurance program.
Since the same insurance company will often handle the claim for both wind and the flood damage, it is important that you verify that insurers do not attribute an unjustifiably large portion of your losses to flood damage.