If you are the owner of a fire-damaged house, one of the most important things you need to do – besides contacting your insurance agent is to gain a clear understanding of your insurance policy.
While most of us have insurance policies on our homes, many of us have also never bothered to read the policies from cover to cover.
If your house has become fire-damaged it is important that you read the policy to see what is covered and what is not covered.
If your policy was destroyed in the fire – don’t worry. Your insurance agent can provide you with a new copy.
When you have your policy here are some particular things to look at:
Declarations Page –
This is a one-page summary document that identifies the property being insured and the policy period. It also lists the amount of the insurance, deductibles, endorsements and the home owners’ names.
Insuring Agreement –
This is a short, simple paragraph that explains that the property is covered by insurance if the premiums are paid and all policy provisions are complied with.
Damaged Items –
This section details items covered by the policy. The key thing to keep in mind here is do not dispose of any damaged items until the claims adjuster has reviewed them and OK’d their removal. Getting rid of items before an inspection could result in you not being reimbursed for them.
This section sets forth a number of instances where property loss will not be covered under the policy. Examples may include intentional loss, flooding, governmental action or earth movement.
This section describes the property covered and lists any limits or restrictions for certain classes or locations of property. Also, depending on the type of policy you purchased, this section may set forth that your property is covered on a “specified perils” or “all risk” basis. Peril refers to a direct cause of loss, such as a fire, a tornado, lightning, theft, vandalism, a wildfire, an explosion and more. Most policies only list what is excluded from coverage, such as flooding and earthquakes.
Here you’ll find definitions for common policy terms, including “you,” “your” and “business.”
Now here are some specific insurance terms and concepts that you should be aware of when attempting to understand your homeowner’s insurance policy:
Debris Removal –
In the aftermath of a house fire, the contractor will need to remove debris from the scene before they can start the necessary repairs. The cost of the removal is paid out of a policy’s “Additional Coverages” instead of being deducted from the policy limit.
Living Expenses –
When fire damage is so severe that you can no longer reside in your home, your policy will pay the extra costs you incur to live elsewhere if it includes Additional Living Expense (ALE) coverage, we’ll talk more about this later.
This is an older term that may not even be in your current homeowner’s policy but if it is, it can be important. Coinsurance means that the policyholder must carry insurance that is at least 80 percent of a home’s replacement cost. If the coverage does not equal at least 80 percent of the value, the insurance company will pay less than the full amount of the claim.
Read Your Policy Closely
After a house fire, you’ll want to closely read through all of the sections listed above to better understand what to expect in the future.
If you do not understand your coverage in a particular area be sure to speak to your insurance agent about it.
But if you do talk to your insurance agent be sure to keep this in mind:
Insurance company adjusters are often under pressure to produce the lowest claim payouts possible.
That means you should not leave analysis of your coverage solely up to them. You need to study and read your policy very carefully – and if you are still uncertain about certain things you may need to speak to an outside expert.
Remember, insurance adjusters are the first line of contact in a long chain of insurance officials. These officials all work for a business that is trying to earn as much profit per year as possible.
House fire claim payouts reduce those profits so they are naturally going to try to limit the payouts.
Adjusters ideally want to keep payouts within a range that ensures higher officials are happy. If a claim payout is too high, adjusters can be second-guessed and face unwanted scrutiny from those above them.
So don’t ever make the mistake that an insurance adjuster is on your side. They are not looking out for your benefit. They are looking to keep payouts as low as possible.
How Adjusters Keep Payments Lower
To keep payouts low they may try to take advantage of questionable circumstances that arise involving a claim. They may also look to spin ambiguous policy language to their own benefit.
These are just some of the tricks insurance adjusters can use to ensure their payout history and job performance are viewed favorably by the company.
One more thing to keep in mind, adjusters know if they can justify paying a low as possible amount now, they can always go back, if they must, and pay more later.
On the other hand though, once a claim is paid out they can’t go back and get the money returned. So they are going to be more careful with the initial payout. They want it to be as low as possible.
Your best defense against a low payout is to study your policy and become an expert on it and on the insurance terms used in it.
A lack of knowledge concerning your policy could make it easier for an insurance adjuster to take advantage of the situation and issue a lower payment.
What About After I Receive My Payment?
After receiving your insurance payment, you are going to have to make a decision.
Do you want to repair your fire-damaged house or do you want to sell the house and combine that money from the sale with your insurance payout to buy a new house?
If you’d like to pursue the second option listed above, We Buy Fire Damaged Houses can help.
We pay all cash for homes damaged by fire. Just fill out the short form below to see if your house qualifies for a free, no-obligation quote.