What’s the best choice for you?
Few things can be more emotionally taxing than suffering from a house fire. First, there’s the threat to you and your family’s safety that can leave you feeling shaken. Then there’s the loss of valuable possessions that you know you’ll never be able to get back. Then there’s the uncertainty of where you are going to go and what you are going to do next.
That’s why we’ve created this checklist to help you recover from a house fire and move on with your life. Discover the steps you need to take to ensure you receive a fair insurance settlement and minimize the hassles you have to deal with after a fire has disrupted your life.
One requirement of all insurance policies is that the policyholder must promptly notify the company in the event of a fire so that its representatives can inspect all damaged property. So as soon as possible after your fire, contact your insurance agent. When speaking with your agent either on the phone or in person, you should also request a certified copy of your insurance policy. Once you have that copy, be sure to read the Conditions section, which can usually be found in the beginning of the policy. This section should contain a list of things you need to do in the event of a fire. Be sure that you follow the list precisely.
To aid you in reporting your fire, most companies now have a toll-free number that allows you to speak to a live representative and make a claim at any time of day or night 24/7.
It’s understandable after going through something as traumatic as a house fire that you may feel like you need to take some time to gather yourself and recuperate. Unfortunately, you do not have that luxury yet. Right now, there are steps you need to take to ensure a good outcome to this horrible situation and the second step is to ensure your property is secure after a fire. You don’t want someone wandering onto the site and getting hurt. You also don’t want scavengers stealing property that you may not be able to be reimbursed for due to you not securing the property in a timely manner.
With your property secured, now it’s time to take a closer look at your policy and understand what protection you have in place. Here are some important components of an insurance policy that you need to be familiar with:
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.
Exclusions – 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.
Coverages – 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.
Definitions – 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.
Coinsurance – 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.
Remember the Conditions section of your insurance policy that we mentioned earlier? Well, within that section there may be list of the insured’s duties which may include submitting what is called a Proof of Loss. If this is listed in your Conditions, you need to submit it promptly.
When it comes to understanding what is covered there are three areas to keep in mind:
Dwelling – This covers damage to your house and includes structures attached to the home as well as materials and supplies located on or next to the residence that are being used or have been used to construct, alter or repair the dwelling or other structures.
Other Structures – This coverage is for structures located on the property but set apart from the house. These can include a detached garage, a storage shed, a fence, a driveway and a patio, for example.
Personal Property – This coverage is limited to 50 to 75 percent of the dwelling coverage (it can be increased through an endorsement) and it is for property owned by the homeowner and stored in the dwelling, such as cash, securities, silverware, jewelry, antiques, cameras, furniture, furs, stamps and coin collections and more.
Additional Living Expense (ALE) Coverage – If your policy has ALE, that means you are eligible to be reimbursed for any necessary increase in living expenses that are required for maintaining a comparable standard of living when your dwelling is not fit to live in due to a covered peril, like fire. In other words, ALE coverage could cover the bill for the hotel you are staying in because your home was damaged by fire.
Fair Rental Value – If you have a rental space in your dwelling that is damaged and not fit to live in, this coverage allows you to receive fair rental value less any expenses that do not continue while it is not fit to live in.
The claims process, particularly after a house fire, is certainly not quick and easy. To make things simpler for you over the long run, you should attempt to stay as organized as possible throughout the process. That means record or keep copies of all receipts, bills and contracts! You should also document all living expenses and any matters that come up regarding your house fire or the claims process. Then keep all this information in one easy-to-access place. Don’t trust your insurance agent to take care of things for you or to keep track of all the paperwork. You need to do it!
Considering the stress and uncertainty that can accompany a house fire, giving your statement to the insurance company can be an event where costly mistakes are inadvertently made. You can’t refuse to give a statement; it is required under your policy. If you refuse, it could trigger a declination of coverage or a mutual refusal to cooperate.
Since you have to give the statement, you should make sure that you are fully prepared. Conduct online research on the subject, practice your answers to questions, you may even want to speak to an insurance professional to get some expert advice. However you prepare, you should be sure to enter the meeting calm and collected and committed to answering truthfully. Don’t take this statement lightly and don’t let your emotions get the best of you when you are giving the statement!
The trauma of having a house damaged in a fire and the stress of the tedious and often lengthy claims process can cause many to accept their insurance company’s first settlement offer just to have the entire ordeal over with. Don’t make this mistake!
One important thing to know here is that you do NOT have to use a contractor that is recommended by an adjuster. In fact, depending on where you live, if an adjuster tries to push you to using a specific contractor, it may be illegal!
If your adjuster recommends a contractor, which is a process known as “steering,” you should ask the adjuster or your insurance agent the following questions:
If they admit that you are eligible to use the contractor of your choice, then insist that they work with your contractor to conclude the claim. Often, when it comes to getting home repairs completed it can be more beneficial to use a “Scope of Loss” statement instead of an adjuster’s appraisal or a contractor’s estimate. A Scope of Loss will specify the damage room by room and will include relevant repair information to assist in settling your claim and restoring your home to its pre-loss condition.
Owning a home that is in need of repairs can add a lot of stress to your life. There are worries about how much the repairs will actually cost – will the insurance settlement cover them all? Then there is the matter of how long the repairs will take. Are you prepared to live in temporary housing for 4, 5, 6 months or even a year or longer?
Then … added to all of that … there are the health concerns to think about (fire damaged homes often have toxic materials in them) and the fact that most buyers don’t want to purchase a home that was once damaged by fire. The whole situation can make you want to pull your hair out!
But it doesn’t have to be that way for you – you can sell your home. That’s right, in this special case you don’t have to worry about finding a good buyer, a good buyer has found you! Learn how you can sell your fire damaged house.