10-Step Guide to Get the Most Out of a Disaster Claim
Knowing what to do when you have a major disaster insurance claim will make a big difference in how quickly you get your claim check and return to your normal lifestyle.
Disaster claims—such as those made after a tornado or hurricane—are the most stressful types of claims. You are under extreme personal stress due to your loss, and the insurance company is likely to be overwhelmed by many other people suffering similar losses. So service can take more time.
Know Your Policy to Get the Best Claim Settlement
Your policy has several provisions that are spelled out in an addendum that is usually attached to the insurance policy declaration page. It can be confusing, so take the time to digest it thoroughly. Good, timely communication with the insurance company will help the claims process go as quickly as possible.
Your First Step in a Claim Is to Call the Insurance Company
The biggest mistake you can make when something goes wrong with your home or personal property is to delay calling the insurance company. You need to find out what you'll be compensated for, what deductible to expect, and if the cause is a covered peril.
Your insurance policy may contain a clause by which you agree to advise the insurer any time there is a material change in risk or liability. Potential damage to your home or others' property fits this description. Not following the insurance contract puts you at risk of nullifying your insurance. This is the last thing you want to do.
Your insurance company also has expertise that can help. A claim might seem fairly straightforward to you, but the insurance company has the expertise of an entire industry behind them to assess the real implications of damage.
Example Where Insurance Company Involvement Saves You Money
One example is water damage. Causes of water damage and hidden problems created by it aren't always clear to the untrained eye.
Sometimes people get water damage from a leaking pipe. They clean it up, have a plumber repair it, and figure it's a closed case. Although the plumber is an expert at repairing the leak, they will not consider the amount of water that has leaked into your floor and wall, do humidity tests, or ensure no mold appears.
An insurance company will do more than just clean up the spilled water. They will provide a trained professional to assess the situation and give you guidance to help prevent long-term damage.
Mold is usually not covered by insurance, so in this example, not having the right advice from the start would cost you thousands of dollars, and could even make it difficult to get insurance later. Your insurance could even be canceled for not doing proper repairs.
What to Do as Soon as Damage Happens in Your Home
At the time of the claim—when the loss is happening—things can be chaotic. While it's important to contact the insurance company right away, you have other responsibilities, too. They are:
- Prevent further loss.
- Salvage any items you can.
- Photograph and videotape the damage as soon as you can to provide this as additional proof of loss.
- Do not throw anything away. Your insurance company has a right to see the items if you expect to be compensated.
Say water is coming into your home from the roof. Prevent further loss by moving items out of the path of the water. If the water has damaged something, move it out of the way, but do not throw it in the garbage. You are preventing further loss by taking these actions and preventing further damage by moving items out of the way.
However, if the situation is dangerous,—a tree crashes through your roof, and you see that the tree could cause a roof collapse—it is not reasonable to put your life at risk to save a table and chairs.
Keep yourself and your family safe, and call for help.
Tips for Getting Reimbursements
- If you incur immediate expenses to protect your property, keep all receipts and document everything if you want to get compensated.
- Emergency expenses may be reimbursed, but non-urgent work and unapproved repairs may not be.
- The insurance contract may specify you cannot take on work without the insurance company's approval. So be very careful to get that approval before committing to hire any contractor.
Example When You Won't Get Paid in a Claim
Wind causes a tree to fall and damages property. You call in a crew to take care of the mess, and when the work is done, you send the bill to the insurance company thinking it will be reimbursed.
Because the insurance company was not given the opportunity to assess the damage, cause of loss, or the work required, they would not likely pay you.
If you call them before you take any action, they will take control of the situation and guide you on the steps to follow so that you can get paid. They must always be involved if you expect them to pay the costs. So be patient.
Will the Insurance Pay for Relocation and a Place to Live?
If the cause of the loss is covered by your insurance, and your home is made uninhabitable by the loss, then Additional Living Expenses (ALE) coverage included in your home policy will pay for temporary living expenses that exceed the normally incurred living expenses.
Even if you do not move out of your home, you may have some additional living expenses. Coverage typically includes:
- Eating out
- Temporary installations of communication lines
- Additional transportation costs, or anything that is reasonably costing you more money because of the claim.
This is very tricky coverage, so make sure to fully understand how it will be paid. Ask your representative what the limit is for your ALE, and get the approval of the insurance adjuster for long-term accommodations. Be sure you understand how much you will get paid. They will only pay for the actual costs of the loss. Expect to put out the money first and wait for reimbursement.
Why Is the Insurance Adjuster So Important?
Once you call the insurance company, they will assign an adjuster to your case and send you a proof of loss form to fill in.
The insurance adjuster is the person who is put in charge of working with you to settle your claim. The insurance adjuster is a professional who is trained in settling losses and assessing damage. They will report what they see to the insurance company, determine what work needs to be done to repair your home, and review your proof of loss items list.
Your agent or broker will not be making decisions on what is paid in a claim, the adjuster will. Your insurance agent or broker can help you if you need to understand your coverage better or what the words in the policy mean.
Some things the adjuster should review with you:
- Additional Living Expense allowance
- Deductible or if you qualify for a waiver of deductible
- Debris removal
- Storage of items (if required)
- Questions about proof of loss inventory list
- Outline what the steps will be in the claim and what to expect
Your adjuster will look at the actual loss and ultimately, after investigation, will decide the cause and what is covered.
Can You Get a Partial Payment Before the Claim Is Settled?
The adjuster may be able to grant interim claims payments for partial expenses to help get you on track. Make sure to ask about this, so you know what to expect.
You want to make sure to have good communication with the claims adjuster as they can be a source of help and guidance to getting the claim closed quickly.
Making Your Loss List and Proving It
Aside from the damage to your building, you will want to make a claim for all the personal items and contents in your home that were damaged. This is probably the most daunting task for people in a loss.
Having a home inventory filled in, or photos and other records prepared in advance really helps. It is not enough to just say you had things, you will need to document and itemize a list (within reason) to "make your claim".
You may be asked for the following details for each loss item:
- Item description
- Room it was in
- Cost at time of purchase (Be careful. If you got the item at a 50% off sale, you might want to specify this because the item won't be 50% off at the time of your claim.) Speak to your adjuster or insurance representative about these kinds of issues.
- Receipts where available
- Condition of the item if applicable. For example, used, new, etc. You should ask your adjuster about this.
- Replacement cost if you have this type of coverage. What will it cost you to replace the item?,
If you do not have the receipts for the items, you will need to do some research to find out the values so you can make your claim.
You can research values of items online by checking retail websites and finding comparable items. Even in cases of actual cash value, check online for the same item being sold used. This may help you understand the values.
The adjuster will review your list and the values assigned. They will check for any special limits, then compare this with the basis of claims settlement agreement in your contract. From this, the amount you will get compensated in the claim will be determined.
If you feel that something is off, ask the adjuster about this. In major losses, these lists are extensive and are hard to properly document. Pay attention to the details, and keep open discussion.
Fill in your proof of loss as soon as possible. Until this is filled in and submitted, your claim will not be completed.
Reconstruction, Bylaws, and Contractor Concerns
Reconstruction costs after a claim can be difficult to manage. Here are two very important ones to note:
Bylaws and Reconstruction Costs
Make sure to find out about costs that impact how much you will pay for your property's reconstruction that insurance will not cover. If, for example, a community bylaw requires your home be rebuilt to new code, and your insurance does not cover bylaws, then you might end up getting stuck with part of the bill.
Contractor Costs Must Be Approved by Your Insurance
You will likely get several estimates from contractors when trying to repair or rebuild your home. You must have your insurance company approve costs before proceeding with the work or committing to a contractor.
Special Policy Limitations and Insurance Claim Payouts
Every insurance policy contains numerous guidelines and clauses about limitations on items of high value and related things like cash in the home, landscaping, collectibles, sports equipment, etc.
When you have items that your home insurance policy contains limitations for, you may not get paid full value for the lost items. Instead, you'll get paid up to the limit.
Example of How Special Policy Limits Can Reduce Your Claim Payment
For example, say you have a $10,000 watch and $1,500 of cash that was lost in your claim. Your policy has a $5,000 jewelry limit and $500 cash limit.
You would want to claim $11,500, but because of the policy limits, you would only get the maximum of the policy limit, which would be $5,500. That's significantly less than you would have been expecting if you didn't know your limits.
When you have items of value that exceed special limits you may consider the option to add a rider to the insurance policy before a claim happens.
What Determines How Much Money You Will Get?
Your basis of claims settlement will describe clearly how much money you should get in a claim based on the policy choice you made when you selected your insurance.
Claims payouts are usually based on one of the following three possible options:
- Actual Cash Value (ACV)
- Replacement Cost
- Replacement Cost With a Cash-Out Option
Actual Cash Value gives you a depreciated value in the event of lost items or materials in construction. This is a very dangerous option to select when purchasing your insurance because it will never allow you to replace what you have lost. A disaster claim is the worst time to have a policy with this kind of coverage.
Replacement Cost allows for the replacement of items that are not obsolete, or impossible to replace. The terms and conditions of this kind of coverage require you to replace the item before getting the full settlement. This means you may receive half of the amount you need to replace the item, and only get the remainder once you provide the proof it has been replaced. If you choose not to replace, then you get Actual Cash Value.
Replacement cost of rebuilding your home is based on the insured value. In the case of the building insurance, if you have insured your home to value, some insurance companies also offer extended replacement cost coverage if the actual cost of reconstruction exceeds the insured building value amount.
Replacement Cost With a Cash-Out Option is a higher-end insurance option and usually is only available for high valued homes or specialized policies. The cash-out option provides a lot of flexibility because it is one of the only types of payouts to allow full replacement cash value—with no obligation to replace—and a check in hand.
Does a Deductible Apply in a Disaster Claim?
Some insurance companies may waive the deductible in a major loss if the loss exceeds a certain amount of damage. If you have to pay a deductible, you may have to pay it before work begins on your home.
Ask your insurance representative how your deductible will work before a claim, as well as if there is a waiver of the deductible clause in your policy so you know exactly what to expect.
Some insurance companies also allow for one deductible, instead of two, if you insure your home and car together.
This could save you money if both your home and car are insured with the same insurance company and the disaster causes damage to both your home and car.
How Does the Claims Payment Process Work?
Once you have fulfilled all the requirements and requests from the insurance company, and the adjuster has pulled together all the details of the loss, they will be able to issue a final claims settlement.
A claim gets settled faster when there is cooperation and good communication with all parties.
- You will be required to sign the proof of loss which will normally outline the costs that are being paid.
- Your signature on this document allows the final release of the final claims payment and confirms to the insurance company that you have agreed on your settlement. Once this is signed, the check is usually forthcoming. You should ask your representative at that time how long their normal delay is and what you can expect.
Getting Your Money's Worth For Your Insurance Claim
The best way to get your money's worth in a claim and receive the maximum amount payable is having a strong understanding of the claims process and what you are rightfully entitled to based on your insurance contract.