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WHAT YOU NEED TO KNOW ABOUT YOUR PROPERTY INSURANCE CLAIM
WHAT IS PROPERTY INSURANCE FOR?
Property insurance is designed to transfer risk to another for the loss to property by damage, theft or destruction. This is accomplished by the process of "indemnification". In short, this means to compensate such as to restore to a pre-loss condition. It is not legal to profit from the insurance of a loss. (There are certain technical variances to this.)
BEFORE THE CLAIM
Prior to filing a property insuranc claim, you should take steps to be confident you have a valid claim to file. This means that you have incurred a loss and that the loss type is covered by your policy. You should consider using the services of a professional such as a property contractor to evaluate the extent of any damages. In most cases, contractors will offer this type of an inspection without charge. You need to be careful in choosing such a contractor. Unfortunately, some contractors will tell you most anything just to try to get a job. Using a reputable contractor, experienced in the insurance contracting industry is very important.
SHOULD I FILE A CLAIM?
You should be mindful that the amount of the loss is sufficiently over your deductible to be worthy of a claim being filed. In some cases, it may not be entirely clear whether the damage is sufficient for a valid claim. A trustworthy contractor will discuss the issues found, show you photos, and give you needed information as to your options. In the end, it is entirely your decision to file a claim or not.
What is the adjusters role?
Once a claim has been filed, the typical scenario will be for the insurer to arrange for an adjuster to visit your property and conduct what is known as a scope. This investigation allows the adjuster to examine the damages as well as the policy coverage. A determination of covered loss will be made and a detailed report produced.
Remember, in Texas the adjuster works for the insurer, not for you. Sometimes it is an advantage to have the selected contractor present at the adjusters scope and sometimes not. Your contractor will discuss this issue with you.
Remember, in Texas the adjuster works for the insurer, not for you. Sometimes it is an advantage to have the selected contractor present at the adjusters scope and sometimes not. Your contractor will discuss this issue with you.
WHAT IS THE REPORT I RECEIVED FROM THE INSURER?
After the insurer has reviewed and approved the adjuster's scope and report, they will issue a report copy to you. If the damages are covered and are in excess of your deductible, they will likely issue a check to you for the ACV amount of your claim. This report is the insurers first version of a settlement offer; it is the specifications for the contractor of the approved work and it is the insurers' price schedule subject to agreement.
As such, it is important for you and your contractor to review this report together and carefully. You want to ensure that the line item report authorized will in fact allow your contractor to properly and completely restore your property to it's pre-loss condition. Any errors and/or omissions may be addressed directly by the contractor through the supplement process.
As such, it is important for you and your contractor to review this report together and carefully. You want to ensure that the line item report authorized will in fact allow your contractor to properly and completely restore your property to it's pre-loss condition. Any errors and/or omissions may be addressed directly by the contractor through the supplement process.
ACV V. S. RCV
ACV stands for Actual Cash Value, while RCV stands for Replacement Cost Value. In short, Actual Cash Value is determined by taking the entire value of the loss, subtracting your deductible, subtracting the appropriate assigned depreciation, and the remainder is your ACV. If you have an ACV policy, this is the total amount you will receive. An RCV policy will allow for the depreciation to be paid back to you after the work is completed, subject to certain terms and conditions.
HOW DOES DEPRECIATION EFFECT ME?
Many people will be confused by the depreciation. Often they think that the ACV check they received is the end of the line, not realizing that with an RCV policy, the depreciation (in most cases) is recoverable. The depreciation is a reflection of the life expectancy of the product already used.
If you are handling your own insurance claim, you may be responsible to pay the full cost of repairs to the contractor prior to receiving the full amount of the insurance proceeds. If, however, you are using a solid, experienced insurance contractor to process your claim, they will likely wait for the final proceeds of the insurance for their final payment.
If you are handling your own insurance claim, you may be responsible to pay the full cost of repairs to the contractor prior to receiving the full amount of the insurance proceeds. If, however, you are using a solid, experienced insurance contractor to process your claim, they will likely wait for the final proceeds of the insurance for their final payment.
WHAT ABOUT MY DEDUCTIBLE?
The subject of a deductible has long been one of contention. The deductible is the amount for which the insured agreed to self-insure. It is also known as the first dollar paid. Neither the insured nor the contractor may give false information to an insurer. The insured may not profit from an insured loss. There are several laws pertaining to this, not the least of which is insurance fraud.
Now, as of September 1, 2019, there is a new Texas law in effect, directly under the Insurance Code. It re-writes the scenario, strengthens the position, adds teeth so to speak, and is under a different authority for enforcement. It is designed and intended to rid the state of unscrupulous and fraudulent contractor and home owner activities.
It is now explicitly illegal for a contractor to waive, compensate or reduce, in anyway, an insureds deductible. It is also explicitly illegal for the property owner to accept any such offer. As TDI (Texas Department of Insurance) says; If a contractor is reducing the deductible, they are also cutting corners and quality in order to make it work.
There is now specific language in regards to this law that is required to be on the contract. Look for it! If it is not there, you are dealing with a non-compliant contractor and have a risk of trouble including cutting corners, bad work, low grade products, risk of criminal charges and fines, financial restitution and possible imprisonment.
Additionally, the insurer now has a specific right under the law to not pay the recoverable depreciation until proof of payment of the deductible, job completion, and full cost incurred have been met. Again, your experienced insurance contractor can help keep everything on track and legal.
Now, as of September 1, 2019, there is a new Texas law in effect, directly under the Insurance Code. It re-writes the scenario, strengthens the position, adds teeth so to speak, and is under a different authority for enforcement. It is designed and intended to rid the state of unscrupulous and fraudulent contractor and home owner activities.
It is now explicitly illegal for a contractor to waive, compensate or reduce, in anyway, an insureds deductible. It is also explicitly illegal for the property owner to accept any such offer. As TDI (Texas Department of Insurance) says; If a contractor is reducing the deductible, they are also cutting corners and quality in order to make it work.
There is now specific language in regards to this law that is required to be on the contract. Look for it! If it is not there, you are dealing with a non-compliant contractor and have a risk of trouble including cutting corners, bad work, low grade products, risk of criminal charges and fines, financial restitution and possible imprisonment.
Additionally, the insurer now has a specific right under the law to not pay the recoverable depreciation until proof of payment of the deductible, job completion, and full cost incurred have been met. Again, your experienced insurance contractor can help keep everything on track and legal.
WHY IT'S NOT ABOUT THE PRICE
Price, Price, Price; get three estimates. This is the old school rule of thumb and is still quite applicable to a non-insured project. However, when it comes to an insured project it is no longer valid. Contractors credentials, experience and expertise, particularly in the insurance field are highly important.
Typically, your price (out of pocket) is the amount of your deductible. If the contractors are insurance and legal compliant, then they should all have the same price to you -- your deductible. When a contractor is reviewing the insurance estimate, if they are concerned about adding dollars, you might want to take a closer look at them. They might be wanting only to pad their profits and not perform the additional work or use the correct products.
The contractor should be looking for errors and omissions in the insurers' estimate. These E&O's will lead to a lower quality and performing finished product. It is important that the contractor identifies each and every item that needs to be replaced/repaired and meets your coverage. This also may include code required upgrades (paid for by your insurance if you have the ordinance & law coverage). So as you can see, it is not about increasing the dollars, but rather ensuring that everything that needs to be done to restore the property to a pre-loss condition is included in the claim scope.
Typically, your price (out of pocket) is the amount of your deductible. If the contractors are insurance and legal compliant, then they should all have the same price to you -- your deductible. When a contractor is reviewing the insurance estimate, if they are concerned about adding dollars, you might want to take a closer look at them. They might be wanting only to pad their profits and not perform the additional work or use the correct products.
The contractor should be looking for errors and omissions in the insurers' estimate. These E&O's will lead to a lower quality and performing finished product. It is important that the contractor identifies each and every item that needs to be replaced/repaired and meets your coverage. This also may include code required upgrades (paid for by your insurance if you have the ordinance & law coverage). So as you can see, it is not about increasing the dollars, but rather ensuring that everything that needs to be done to restore the property to a pre-loss condition is included in the claim scope.
HOW IS THE PRICING DERIVED?
The pricing itself is typically done in a program called Xactimate®. It is the insurance and contractors mutually accepted standard of practice. The pricing is done by each specific line item and represents the middle of the road price one should expect for the labor and materials each item and for that given location. So there is usually no contention in regards to the price, only the issue of covered and included items (or not) (the scope) to secure a proper and complete restoration.
Remember that property claims, auto claims, personal injury claims settlements are the product of negotiations. Your insurer does not want to pay more than they must. Property claims are subject to negotiations for legitimate and necessary items to restore the property to a pre-loss condition. Though your contractor may not negotiate your claim, your contractor can help ensure that the insurer is including all necessary items in the scope.
Remember that property claims, auto claims, personal injury claims settlements are the product of negotiations. Your insurer does not want to pay more than they must. Property claims are subject to negotiations for legitimate and necessary items to restore the property to a pre-loss condition. Though your contractor may not negotiate your claim, your contractor can help ensure that the insurer is including all necessary items in the scope.
How to proceed through the property claim process
This article outlines a basic approach to claim processing. Let me add the following: either you or your selected contractor will be responsible for the claim processing. It is a very bad idea to have both involved in the processing as this is likely to lead to confusion, delays, bad results, denial of claim, denial of supplements, and investigations of possible wrong doings even when none were intended or occurred.
If you choose to handle your own claim, then be responsible for and handle it all, though your contractor may be able to give you some insight.
If you have your contractor handle your claim processing, then you should be kept in the loop so you are aware of everything happening and being submitted to the insurer, but allow the contractor to handle the process. Since the average homeowner is not familiar with all of the issues involved in an insurance claim or in the construction aspects and details, or able to function in the complex Xactimate® program, this is typically the better option.
Still, the insured may need to step in on occasion to help dispute any item denials particularly when they involve specific coverage or policy issues.
The contractor should have access to and expertise in the Xactimate® program, the documentation requirements, photo evidence requirements, processing procedures, etc. A well handled professional processing will result in a better outcome.
If you choose to handle your own claim, then be responsible for and handle it all, though your contractor may be able to give you some insight.
If you have your contractor handle your claim processing, then you should be kept in the loop so you are aware of everything happening and being submitted to the insurer, but allow the contractor to handle the process. Since the average homeowner is not familiar with all of the issues involved in an insurance claim or in the construction aspects and details, or able to function in the complex Xactimate® program, this is typically the better option.
Still, the insured may need to step in on occasion to help dispute any item denials particularly when they involve specific coverage or policy issues.
The contractor should have access to and expertise in the Xactimate® program, the documentation requirements, photo evidence requirements, processing procedures, etc. A well handled professional processing will result in a better outcome.
HOW TO SELECT A CONTRACTOR TO
HANDLE AN INSURED PROJECT
Selecting a contractor can seem like a daunting task. In the case of an insurance claim project, you are definitely not looking for the best price contractor. This will only lead you down a very bad road of poor work, low quality materials, short cuts, and possible criminal complications.
It is important to share the claim estimate report with the contractor. If a contractor doesn't review it, you should consider looking elsewhere. Reviewing this report is the only way the contractor knows what specific items have been approved by the insurer and what have not. Reviewing this report is where you have the meeting of the minds of the insured, contractor, and insurer. For a successful project, everyone must be on the same page.
Your contractor selection should include at least the following criteria: licensed (locally registered); bonded; insured; in business over 2 yrs; BBB/a+; top Angies's list rating; local contractor (verified); zero or low complaint experience; strong references/testimonials; experience with the insurance industry; experience with the Xactimate® program; demonstration of full insurance and legal compliance; in most cases no money paid until either material delivery or work completion and the contractor waits for the final insurance check for the final payment.
Also, if you have multi-trade damages, a general contractor meeting the above requirements can save you tremendous headaches and time by getting all the restoration done through one contractor. This provides for one contractor dealing with your insurer for all damages to be fully restored to a pre-loss condition. Also, this allows the insured to have one source of an umbrella warranty for all work done.
It is important to share the claim estimate report with the contractor. If a contractor doesn't review it, you should consider looking elsewhere. Reviewing this report is the only way the contractor knows what specific items have been approved by the insurer and what have not. Reviewing this report is where you have the meeting of the minds of the insured, contractor, and insurer. For a successful project, everyone must be on the same page.
Your contractor selection should include at least the following criteria: licensed (locally registered); bonded; insured; in business over 2 yrs; BBB/a+; top Angies's list rating; local contractor (verified); zero or low complaint experience; strong references/testimonials; experience with the insurance industry; experience with the Xactimate® program; demonstration of full insurance and legal compliance; in most cases no money paid until either material delivery or work completion and the contractor waits for the final insurance check for the final payment.
Also, if you have multi-trade damages, a general contractor meeting the above requirements can save you tremendous headaches and time by getting all the restoration done through one contractor. This provides for one contractor dealing with your insurer for all damages to be fully restored to a pre-loss condition. Also, this allows the insured to have one source of an umbrella warranty for all work done.
ARE THERE OTHER OPTIONS AVAILABLE IF MY CLAIM IS
UNFAIRLY DENIED OR UNDER PAID?
Absolutely! First realize that just because your claim was denied or is a partial claim, does not mean it is incorrect or unfair. However, if it is unfairly or inappropriately denied or under paid, there are options you may consider.
Some of these are: you may contact your insurer for a re-adjust (which may also be handled by your contractor through the supplement process); you have the option of the appraisal process; you have the option of involving a certified inspector or even an engineer; you also have the option of contracting with a public adjuster (this adjuster does work for you!); and you have certain legal options ( use of a lawyer) such as mediation and others.
These are usually approached in a stacking order of necessity. But when looking for advice or deciding which way to turn, you might want to have a consultation with a policy holder lawyer.
Some of these are: you may contact your insurer for a re-adjust (which may also be handled by your contractor through the supplement process); you have the option of the appraisal process; you have the option of involving a certified inspector or even an engineer; you also have the option of contracting with a public adjuster (this adjuster does work for you!); and you have certain legal options ( use of a lawyer) such as mediation and others.
These are usually approached in a stacking order of necessity. But when looking for advice or deciding which way to turn, you might want to have a consultation with a policy holder lawyer.
SUMMARY
In short, the claims process does not have to be a monster. Simply follow a proper process, involve competent collaborators and professionals, and you should be able to achieve the desired results with a minimum of conflict or confusion. This will yield a better restoration and a minimum cost.
DISCLAIMER
The above information is presented for general information only. It is not delivered or intended to be legal advice or insurance advice. If you have specific legal or insurance related questions, please contact the appropriate licensed professional.
© Tace Kenyon 2019
© Tace Kenyon 2019