After a disaster strikes your home, one of the immediate issues to address is the repair and replacement of your residence and personal possessions. Even with the best insurance, you're certain to have out-of-pocket costs for the insurance deductible as well as for expenses that aren't covered by insurance. Because money may be tight, it's important to determine what your insurance claim is worth, and work to maximize your insurance settlement so as to minimize your out-of-pocket expenses.
After reporting your claim to your homeowner's insurance company or renter's insurance company, an insurance adjuster will inspect your home and the damage it has sustained. It is the claim adjuster's job to determine how much the insurance company owes you for the structural damage, how much the insurance company owes you for the contents of your home (your personal belongings), and how much they owe you for additional living expenses while you're displaced from your home.
Maximizing the Value of Your Claim
To ensure that you get the largest amount possible for your claim:
- Make the insurance adjuster aware of all structural damage
- Give the adjuster a complete home inventory, as well as receipts and/or photos of possessions that were destroyed or damaged
- Give the insurance adjuster the receipts for temporary repairs necessary to prevent further damage to your home
- Save damaged items to show to the adjuster
- Get your own repair estimates from contractors to compare to the claims adjuster's estimate
- Consider hiring an independent insurance adjuster and work with an insurance claims attorney to fight low settlements
An independent, or public, insurance adjuster is an individual who you hire to estimate the value of your claim. A public adjuster will help you maximize the value of your claim settlement. In contrast, the insurance adjuster who is sent by the insurance company works for your insurer, and has an incentive to save money for the insurer.
When hiring a public adjuster, understand the following:
- The independent adjuster or public adjuster has no affiliation with your insurance company
- The adjuster works to get you the maximum value under your policy
- A public adjuster generally charges you a percentage of the total value of your settlement
- It's important to check his or her qualifications before hiring an independent adjuster, since scam artists often pray on disaster victims
Replacement Cost Versus Actual Cash Value
As your insurance adjuster calculates the value of your claim, one thing he'll take into consideration is whether your insurance policy covers reimbursement for the replacement cost or the actual cash value of damaged and destroyed items.
An insurance policy that covers the replacement cost will reimburse you for the real cost of buying an item that's similar or identical to the item that was damaged. For example, if your home cost $100,000 to build 10 years ago, and is completely destroyed in a disaster, under replacement cost, the insurance company will pay to rebuild a similar or identical home, even if it costs $130,000 to build today.
An insurance policy that covers the actual cash value will reimburse you at a lower rate for items that were damaged or destroyed. Using actual cash value, the adjuster will deduct the cost of depreciation (the reduced value due to age, wear and tear, and obsolescence) from the replacement cost. So if you owned a 2-year-old dishwasher that cost $500 when new, the adjuster might decide that the value of that 2-year-old dishwasher is only $250 today, because it's depreciated by $250 in value. Using actual cash value, you'd be reimbursed the cost of a similar dishwasher minus the $250 in depreciation.
When purchasing homeowner's or renter's insurance, talk to your agent about the cost of a policy that reimburses at replacement cost in comparison to one that reimburses at actual cash value. You'll pay a lower premium on actual cash value policies, but your out-of-pocket costs will be higher in the event of a disaster.
Questions for Your Attorney
It's important to understand that insurance companies are in the business of making a profit. The more money they give you to settle your claim, the less of a profit they'll make. Insurance companies want to pay you the lowest possible amount to settle your claim. So you should be prepared to fight if you're dissatisfied with the proposed settlement. An attorney experienced with insurance claims can help you maximize the value of your claim settlement.
When meeting with an attorney, ask the following questions:
- Have you previously handled cases like mine?
- How much do you charge for your services?
- Will I owe you money if you are unable to get a larger settlement?
- What are the strengths and weaknesses of my case?