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Homeowners whose property has been damaged or destroyed in a major disaster, such as wildfires or flooding, will commonly look to their insurance for relief—with varying degrees of success. There can be big dollars at stake in repairing and rebuilding, and neither you nor the insurance company will be particularly eager to shell out the cash. Here are tips to keep in mind as you interact with your insurance company and its adjustors.
If you were forced to evacuate your home, you might not have grabbed basic necessities—from a toothbrush to a work uniform. Your homeowners' policy will cover the cost to replace these items, but you don't have to file a claim and have it approved before heading to the store. Instead, ask your insurer for an advance against your eventual claim. If necessary, you can request that a representative bring a check to you wherever you're staying, be it a hotel or a friend's house. Save the receipts for everything you buy, and be reasonable—if you lost khakis and a blazer, don't head for the Armani suits (you'll end up paying the difference). Check your policy—even if you have "replacement" coverage for the house itself (see Tip Six, below), you might have only "actual cash value" for the personal items that were in your home. A good agent will alert you to this.
All policies require homeowners to report their loss as soon as is reasonably possible. You can comply by calling your agent or sending an email.
After that, you'll be asked to submit a "proof of loss claim," in which you itemize your losses and list their value. If you delay notifying your insurance company, you might find yourself far down on the list when it comes time for the company to send an adjustor to inspect your property and deal with your claim. Before that time comes, however, don't be surprised to see a drone flying over your property; this is an increasingly common way for insurers to inspect damage, particularly when it's widespread and they want to map a large area.
If your claim is based on major damage, get organized. Calls, emails, and letters can be crucial bits of evidence if you and the company later differ as to who said what to whom, and when. Take notes during every phone call, and organize your communication, in both physical and virtual files; with separate folders to store estimates, invoices, bills, permits, and contracts for repairs. Never part with an original document. If your insurance company wants to see an invoice or bid, make it a copy.
Fortunately, insurance companies are required to handle claims in a timely manner. In California, for example, they must send you a "notice of intentions" within 30 days of receiving your claim. If there's no dispute over coverage, you're entitled to payment within that time, too.
If your company seems to be acting slowly, write to it (and consider sending a copy to your state's Department of Insurance). Insurance companies are less likely to string you along when they're in the midst of a disaster and know that all eyes are on them. Of course, they might also be backlogged with claims.
Your policy will include a "loss of use" clause, which entitles you to reimbursement for living expenses while you're out of your home. However, you're entitled only to additional living expenses—that is, the difference between what it costs you to live on a daily basis at home and what it costs now. For example, if you ate most meals at home before the fire and regularly spent $300 a week on groceries, but are now spending $450 per week at restaurants, you can claim only $150.
When it comes to the motel bill, however, you can probably claim the whole thing. Even though you can't live at home, you still have to pay your mortgage, taxes, and insurance, so any other arrangement would be unfair.
What if you're living with friends or family? Many evacuees do so, often on an extended basis. Even though you probably aren't paying your hosts, you might be able to convince your insurance company to reimburse them for the cost of putting you up. Ask your hosts to itemize the value of the room and services they're providing. Be reasonable and specific, and be prepared to negotiate with your insurance company over this one. It might help to point out how much more the company would have had to shell out had you chosen to stay in a hotel and eat in a restaurant.
Your homeowner's policy will enable you to rebuild or repair your home. If you have an "actual cash value" policy, you're entitled to the amount of money it will take to return your home or its contents to its market value before the fire, which if it was run down and needed a new roof, could be significantly less than what you'll need for a quality rebuild.
If you have "replacement cost" coverage, you're entitled to the amount it would take to replace the home or contents, up to a limit that was fixed in your policy in advance. (Only a rare type of policy, called "guaranteed replacement" coverage, actually lets you claim all actual rebuilding costs.)
You don't have to rebuild. If you have replacement coverage, that doesn't mean you have to actually rebuild your home on the same site. You can rebuild at a different location (if it costs more to build in Hawaii, for instance, you pay the difference). If you decide to use the money for something else, such as starting your own business or creating a retirement fund, your "replacement" policy will change to an "actual cash value" policy (in broad terms, you'll get about 15% less).
For either type of coverage, you'll need an estimate of the prior market value or the cost to replace the damaged items or parts. Your insurance company will offer its own estimates, supplied by its own adjustors. Because these adjustors work for the insurance company, it's in their best interests to get you to quickly accept a modest settlement. You're under no obligation to accept these numbers.