If you’re a first-time homeowner, or about to become one, you may be wondering how home insurance claims work. In this complete guide, we’re going to explain all about it. This way, should an unpleasant event happen, you will know exactly what to do to get what you’re owed from your insurance policy.
What is a home insurance claim
A home insurance claim is the process through which you require reimbursement from your homeowners insurance when your home or personal property are damaged, destroyed or burglarized by a peril that is covered by your homeowners insurance policy.
In other words, to get the money from your insurer after your home is affected by a covered event, you need to file a home insurance claim. Knowing and doing all the right steps in the right manner is key. This is because not all home insurance claims are approved. Also, not all that are approved will give you the amount of money you expect.
How home insurance claims work – a step by step guide
Step 1: Have a home inventory
A successful home insurance claim process starts before the damage happens. You need to have a home inventory. A home inventory is a complete list of all the possessions in your home. You can go beyond the written list, and register your items in visual form (photos and videos). One way to make it easier is to use one of the many apps available for this purpose, such as Sortly or Memento Database.
Having a home inventory will make the insurance claim process much faster and less of a hassle, should disaster strike. And it’s logical. It’s easier to know what you have, when you still have it. Trying to rebuild a complete list of your possessions, from the top of your head, when they already have been damaged, stolen or destroyed, can sometimes be close to impossible, with all the stress you’re going through at such a difficult time.
When creating your home inventory, make sure you catalog each item. Write down when you purchased it, a general description, make and model, and what you paid for it. If the item has a serial number, write that down too. For big ticket items, keep the receipts.
Step 2: Contact your insurance company or insurance agent right after the event
Your home insurance policy will specify the timeline in which you can file your claim in order to be eligible for payment. Missing your deadline for filing will mean that you will have to pay for repairs/replacements out of pocket because your insurance will not reimburse you anything.
The sooner you start the claim process, the better, because it will be easier to reconstruct the events in detail.
Step 3: Make a list of damaged property
After you contact the insurance company/agent, an adjuster will be assigned to your case, to assess the damage. While you wait for the adjuster, it is crucial to make an exhaustive list of all the parts of the house and items that are damaged.
If possible, attach pictures and videos to your damage list. Make sure you don’t immediately throw away damaged items. You need to talk to your insurance agent or adjuster before doing that.
Step 4: Minimize further damage
Permanent repairs should only be done after the inspection and after being given the green light from your insurer. But you can make emergency provisional repairs such as covering broken windows and doors. An emergency repair is considered such if, by not doing it, your health and safety are at play.
If you made provisional repairs, make sure you keep all repair receipts to get a chance to have them reimbursed.
Step 5: Get the most out of the damage inspection
After you filed your claim, an adjuster comes to inspect the damage and evaluate the loss. Now your initial home inventory and your damage inventory come into play. Make sure you have both so that the adjuster takes note of what you owned before the event (and in what state the items were) as opposed to how things look after the event.
During the inspection, walk around with the adjuster so that they don’t miss anything. When inspecting your home, the adjuster will consider several factors:
- The damaged surface of your home
- The damaged items
- Whether the damaged item can be repaired or must be rebuilt or replaced
To make sure the evaluation is as accurate as possible, have your builder or contractor assisting the inspection.
Step 6: Get your claim acceptance or rejection
After the inspection, once the evaluation is complete, the insurance company will accept or reject your claim. By law, the insurance company must do so within a certain deadline. In Texas, this deadline is 15 business days after getting all the information they need from you.
If your claim is rejected, the insurance company must inform you, in writing, about the reasons for the rejection.
Step 7: Receive your payment
The reimbursement check must be sent within a certain timeframe after the insurance company accepted your claim. In Texas, this timeframe is 5 business days. Keep in mind, depending on the situation, in some cases the check will not be sent directly to you. The insurance company may decide to send part of or the entire payment to your contractor.
Moreover, most companies make the payment in two checks. The first check will be calculated based on the estimate of repair costs and/or the cash value of the items that need to be replaced. The second check will be paid after the contractor issues the bill for the finished work.
Here too, there is a deadline: the repairs or replacements must be completed within 365 days from the date of the covered loss, otherwise the second check will not be issued.
Last but not least, remember that if you have a deductible on your home insurance policy (and most likely, you do), its value will be subtracted from the payment you receive. If, let’s say, the damage was evaluated at $10000 and your policy has a $2000 deductible, the amount the insurance company will pay for the claim will be $8000. If the value of the damage is lower than your deductible, the insurance company will not reimburse you at all. In fact, in this case you shouldn’t even file a claim.
How long does it take to receive all the payments? It depends on the type and size of the damage and the duration of the repairs. In extreme cases when your house must be rebuilt, it can take up to 24 months.
How home insurance claims work with a mortgage
If you have a mortgage on your home, the payment process will be slightly different. Your lender will also be named as “insured” in your policy. This is because the lender has a vested interest in your home getting repaired/rebuilt, as the house is the actual warranty for the loan they gave you.
What this means is that when the insurance company issues the checks for your claim, the checks for the repairs to the actual house will be payable both to you and the lender (mortgage company).
As a result, to cash the check, you will have to work with the lender. What usually happens is that your lender will put the money into an escrow account, and pay for the repairs as they are done. This way, they want to make sure the repairs actually get done and you’re not just walking away with the money.
As for the checks for your personal items within the home, the insurance company will issue these solely to you.
What if the insurance company doesn’t pay enough?
There may be cases when you think that the amount the insurance company offers to pay for your claim isn’t enough to cover the loss. In this case there are several things you can do.
1. Communicate your concerns to the insurance company.
Mistakes happen, and the insurer might have overlooked some aspects of the damage. When you ask for an adjustment, make sure you send supporting documents such as estimates from contractors.
2. Request an appraisal
If you are not satisfied with the response to your request for adjustment, you can go a step forward and ask for an appraisal. The terms for appraisals should be specified in your insurance policy, and there’s always a deadline for requesting an appraisal.
The way this works is: both you and the insurance company hire a separate appraiser. A third appraiser is hired by the two appraisers as an umpire. Both your appraiser and the insurance company’s appraiser will then make estimates of the total loss in your claim. Then, the third appraiser (the umpire) makes the final decision as to what the final amount due for the claim is.
3. File a complaint with your state’s Department of Insurance
When doing so, keep in mind that the Department of Insurance can only make an insurance company pay if it determines that the failure to pay violates the law or the terms of your policy.
4. Hire a public adjuster
If you disagree with the value of damage after an assessment from the insurance company adjuster, you can hire a public adjuster. Keep in mind, the public adjuster will work for you, not for the insurance company, so you will also have to pay a fee for this service.
At the end of the day, no two insurance claims are the same. How insurance claims work depends on your policy, on the type and size of damage, and on the event that caused it. But by following the guidelines above, you can make sure you are doing things in the correct order and you set yourself up for a successful claim.