Before You Make A Homeowner Insurance Claim Read This

by Neal Frankle, CFP ®

You don’t need to live in Hurricane Alley or in the wake of super storm Sandy in order to suffer losses to your property. There are floods, earthquakes, fires, blizzards and more that threaten homeowners 24/7. That’s why it’s smart to understand the homeowner insurance claim process before you suffer damage to your home. The last thing you want to do is try to figure this out while your house is 3 feet under water.

Sadly, I learned this first hand. Several years ago our first floor flooded. Up until that point, all I really cared about was how to save money on homeowners insurance. That was a great example of being penny wise and pound foolish. The water damage took out most of the interior walls, the bathroom and the kitchen too. I didn’t know the first thing about homeowners insurance claims at the time and we were under tremendous stress. We made rash decisions that cost us thousands. Here’s what I learned :

1. Contain the Damage

When your house takes a hit, the first order of business is to make sure the problem doesn’t go from bad to worse. Shut off the water source if you have a flood. Close off the water supply to your house if the flood is internal. If the water is coming from outside, cover holes in your roof, windows and walls if you can do so safely.

Be careful if you have to climb up a ladder, get on the roof or if you have to handle dangerous materials like broken glass. Don’t put yourself in danger’s way. Your safety is more important than a few extra bucks. Don’t take any chances. Safety first amigo.

2. Make A Documentary

Photograph and videotape your loss. That might mean taking pictures before you cover up the damage if that’s what it takes to show the full extent of the problem. Also, take notes or describe what you are videotaping as you film. It’s true that a picture is worth a thousand words but sometimes a few extra words can make all the difference.

Next, make a list of the damage to your home and property. (Don’t throw any damaged property away. Instead, store them so your adjuster can inspect them later.) Then take the list and write down when you bought each item, what you paid for it, where you bought it and what you think it will cost to replace it. If you have pictures and videos of your home and property taken before the damage occurred, so much the better. (I video tape the contents of my home once a year. It takes less than 20 minutes and provides a lot of peace of mind. I recommend you do the same thing.)

3. Make the Call

As soon as possible, call your insurance agent to let her know what is going on. Give her a copy of the list of the items you made in step #2 above. (Most people stop here and this is a terrible mistake that can cost thouands and thousands of dollars.)

4. Don’t Trust “The Man”

Your insurance company is going to send out an adjuster. Your agent will tell you how wonderful this adjuster is. The adjuster willl provide her assessment of what the damage is and how much you are covered for. Remember that she’s working for the insurance company – not you. Don’t accept her assessment blindly. Get at least two repair or replacement estimates. And keep receipts for every nickel you spend on repairs, purchases and construction.

I am a big fan of getting my own licensed adjuster too by the way. If you get an adjuster, he or she works for you – not the insurance company. She’ll act as an advocate for you and can make all the difference. A public adjuster knows how to work with insurance companies and how some insurance companies work you over. She will probably point out additional covered damage that homeowners often overlook.

What Kind of Damage Should You Insure Against?

1. Water

You probably already guessed that water is behind most claims for homeowners insurance. But water often originates inside your home. Bathtubs and drains overflow. Roofs and pipes leak. Make sure your flood damage insurance policy covers these risks.

2. Accidents.

You are responsible if someone gets hurt on your property. That includes friends and relatives. And it also includes any professional or repair person. That’s right. They can sue you if they are hurt while working at your home. Make sure your policy covers any type of personal injury suffered by anyone while at your home.

By the way, “injury” includes being on the business end of an animal bite. Make sure your policy covers dog and other animal bites too.

3. Fire

If you are unfortunate enough to have a fire in your home there may be very little proof of the extent of your damages. That’s because everything will be gone. Since that is almost always the case, take a few minutes now to protect yourself. Videotape the contents of your home now. Detail and inventory your property. Keep receipts for expensive and specialty items and keep all this information in a safe place – outside your home.

Final Note

If your damage is extensive enough, you’ll need a contractor to do repairs. If so, make sure you proceed carefully. You’re first impulse will be to get the work done quickly but slow down. Home construction remodeling is full of pitfalls you need to avoid. You don’t need to use the company to do both the debris removal and the reconstruction. This was a key mistake I almost made and I’m glad I was able to avoid it.

What has been your experience with homeowner insurance claims? What would you do differently?

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