You may think your house is in ruins, but you don’t know how to manage the insurance claims process. These are six common mistakes homeowners make in this crucial time.
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“The past two years have seen Mother Nature unleash her fury, leading to property losses of terrifying, historical amounts,” says San Francisco attorney Dan Veroff.
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“And many insurance companies, which were supposed to make families whole again, did the exact opposite. Adjusters significantly underpaid valid claims. The lack of knowledge among homeowners and businesses about the claims process, as well as the steps that they needed to take prior to the loss, has made the damage even more severe.
He described “the most serious mistakes that a claimant could make when faced with a CAT (catastrophic) insurance claim.”
- Take whatever the adjuster tells your as gospel
- Insurance companies hire a large number of “cat storm chasers”, almost all of whom are from outside the state. These insurance adjusters rarely have the specialized knowledge and training to create accurate estimates of repair costs or state law that applies to your loss.
- They will often tell claimants that they do not have the same insurance coverage as their policy.
- Do not follow their advice without consulting an attorney. (I will be discussing the type of attorney I recommend to you in a moment. This is very important to me!
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- Assume the first payment is complete and complete
A CAT adjuster will usually bring a colleague who is part of the insurance company. They will give you a quick estimate in your car, and then cut you a check for rebuilding costs and temporary living expenses.
Here is where things get sticky.
The insured will usually meet with a contractor to prepare a bid for repairs. However, it may take several months before it arrives and it will almost always cost more than the adjuster has paid.
You could have shared a rebuilding estimate with the adjuster if you had one available prior to the loss. You are now back at square one and your temporary housing payment has been reduced further. Your claim may have been assigned to a second or third adjuster because CAT adjusters usually only serve a brief time.
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It is important to quickly find out the actual value of your claim. Don’t trust the insurance company to do so. Expect the initial estimate to be significantly lower than it should be. It is your duty to investigate what the CAT adjuster tells you and others who follow.
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Accepting what the adjuster says can lead to costly mistakes under extreme pressure.
It is impossible to get an estimate for rebuilding your home the same way it was before a loss to CATs.
It is not unusual for homeowners to wish to make changes to the original design of their home after a disaster. Your carrier must pay for rebuilding your home in the same way it was before the loss. You can rebuild something else, but the rebuilding costs will determine your maximum insurance budget. The adjuster will not accept proof of your home if you don’t have any modifications or improvements. This is because they won’t be able to dispute your claim and keep their low estimate.
This is the question you should answer: “How much will it cost to rebuild or replace the house we have, and not the one we want to build?”
You will be ahead if you have an estimate from a contractor before any loss could occur. The estimate can be used to verify that you have sufficient insurance coverage. It is important to have a replacement cost estimate as soon as possible after a disaster. Once you have received the replacement cost estimate, the contractor should also prepare an estimate for your home. You should be fine as long as the cost is within your insurance coverage.
- It is not a good idea to make a list of all the items in your house.
Consequences Who will be able to recall all the books, dresses, suits, and details? You will not receive payment if you don’t have proof.
This inventory can be assembled in advance so that you can increase your personal property coverage and avoid being underinsured. The list can be saved to the cloud.
- A lawyer who does not have experience in insurance law should be hired
Consecutions: Losing your rights and missing deadlines. It can take years to get involved in litigation that could have taken only a few months. Finding out that the case went badly.
Insurance law is a unique area of law. You should not believe any lawyer who says they know anything about insurance law, such as tax, personal injury, divorce and tax. Because they lack knowledge, inexperienced lawyers with property insurance law lose cases.
Look for a lawyer that focuses primarily on property insurance.
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- Exaggerate or lie about your loss
- Consequences You can lose everything if you lie about one dollar!
- Yes, some unethical attorneys pad their bills. Here’s one clear case
- This article was written and presented the views of our contributing advisor, not the Kiplinger editorial team. Check adviser records with FINRA or the SEC.
