Be familiar with your homeowners insurance policy before you need it. Read the policy thoroughly so you know what is covered, how much is covered, and what is excluded.
Before You Have a Claim
Use a video recorder or camera to document your belongings in a room-by-room inventory, with all closet doors open. Visual proof of your belongings will verify the items were actually on your premises and ensures you won’t forget anything in the event of a claim. Providing you with this kind of documentation will also help determine how much personal property insurance you need. If you cannot make visual images of the inside and outside of your home, keep a written inventory of the contents, including the date purchased, where it was purchased, the cost, and a receipt. Obtain appraisals of your special valuables such as antiques, jewelry, stamp, coin, and other collections. You may want additional coverage if the value of these items exceeds the limited coverage in your policy. You may want to maintain this information on a computer disk that can be easily updated. Store your records in a safe deposit box, at a relative or friend’s home, or at your office.
Contact your producer for a home inventory form to complete or request one from the Insurance Information Institute at the address on page 20. Free home inventory software is available on the Internet at the Insurance Information Institute and other websites. .
After a Loss
As soon as possible after the loss, you need to notify your producer or insurance company. Follow up any conversation in writing. Losses that involve theft, or which cause you to suspect arson, should also be reported to the police. If your home is damaged and it is safe to do so, make temporary repairs to protect the house and your belongings from further damage. For example, if the windows are broken due to a burglary, you should cover them with plywood or other material to protect your home from weather damage and further vandalism. Expenses for temporary repairs are covered under your policy; be sure to save receipts or bills.
It is important that the repairs be temporary and not permanent. If you make permanent repairs before the insurance company inspects the damage, your claim may be denied. In addition, you should preserve all evidence of the loss, including the damaged property, so that it can be inspected by your insurance company. If you have any doubts about whether the repairs will be considered permanent, check with your insurance company before work begins.
Soon after you report your loss to the insurance company, an adjuster will be sent to inspect your property. Insist on being present during the inspection, so that you can assure that the adjuster does not fail to notice any damage. During the inspection, the adjuster will assess the damage to your home and estimate the costs of repairs. The adjuster will also determine whether the damage is covered under the terms of your policy. You may want to bring your own contractor to inspect the loss and act as your representative during the inspection.
Replacement cost payments for small building damage claims will be made whether or not actual repair or replacement is complete. For large losses, insurance companies will only pay the difference between actual cash value and replacement cost when the property has actually been repaired or replaced.
If, at the time of loss, the amount of insurance purchased does not equal the specified percentage, usually 80%, of the full replacement cost of the building before the loss, the insurance company will pay less than the replacement cost. The amount the insurance company will pay is the greater of the actual cash value or the replacement cost less a penalty specified in the policy. The policy will never pay more than the stated policy limits.
Complete a Proof of Loss Statement. In some instances, your insurer will request a signed, sworn statement called a Proof of Loss. Your company will provide you with a standardized form to use. You must file a Proof of Loss if the company requests you to as it is the basis for determining the value of your claim.
In most cases, you will be asked to estimate the actual cash value of the household items you have lost and the cost to repair your home. You must provide the company with evidence if you have purchased a replacement item. Contractors, catalogs, and local stores are good sources of current cost information. Be sure to find out from your insurer if you should include sales tax in your cost estimates, and whether you should use exact costs or round numbers to the nearest dollar. Do not forget to include small items such as kitchen utensils or clothing accessories, as the replacement cost of these items can add up.
Negotiate the Final Settlement. After the adjuster has reviewed the damage to your property, the adjuster will prepare or obtain an estimate of the cost to repair or replace your home and personal belongings. If you disagree with the adjuster’s estimate, explain your reasoning to your company. It is possible your company has overlooked something and is willing to make adjustments. If you continue to disagree with the company’s valuation of your loss, you are entitled to resolution of your dispute through a process called appraisal. See page 4 for an explanation of the appraisal process.