Yes you can. However, you should be aware that there are some extra steps required, and you will want a contractor who is experienced in dealing with insurance companies. An insurance claim can be a great excuse to finally do that remodel project you’ve wanted to get done. A lot of the costs for the remodel like demolition, new drywall, painting and floor coverings might be fortuitously covered by your insurance settlement making that big project much more affordable.
When your home is damaged by a covered event, your insurance company owes you the money to repair your home to pre-loss condition. If you have a mortgage, your mortgage company will take steps to make sure their interest in the property is protected. The check you receive from your insurance company will have your mortgage company listed as a payee and they will hold the money in escrow until repairs are completed and inspected. Your insurance policy is a contract that requires your insurance company to pay you for damages, and your mortgage is a contract that requires you to make payments and maintain your property. Nowhere are you obliged to use your insurance money to make your home exactly the way it was before your loss.
Step 1 is to complete all required emergency services – this generally includes drying of wet materials, demolition of nonsalvageble building materials, removing contents from affected areas, cleaning of smoke or contaminated water residue, and any other service required to stabilize your home’s environment, prevent further damage, and identify 100% of the damage. These activities are covered under your policy and will not affect the payment you receive for repairs.
Step 2 is to have your insurance adjuster inspect the loss and write an estimate for repairs. It is a good idea to have your contractor present during the inspection since insurance adjusters usually do not have a construction background.
Step three – review the insurance company’s estimate for accuracy and completeness with your contractor. Things that are often inadvertently left out or undervalued by insurance adjusters are
- Code issues that most policies have coverage for – for example, you may need new wiring for the affected area of your home.
- Wall surfaces – plaster is worth much more than drywall, or if you have paneling over drywall you are owed for both
- High end items like expensive granite flooring, real or exotic wood trim, wool carpet, custom built cabinetry, special HVAC systems, etc
- Extra work needed to perform some repairs due to difficult access, lack of availability, or existing conditions in your home
- Some prices in the estimating software estimating software may not be sufficient for certain items. Get documentation for those items in the form of subcontractor bids, photos, costs, etc.
This step is very important. If you are simply repairing damage, and extra work is required it is easy to supplement your claim, but if you are making changes, the insurance company may deny your supplement because it would not have been needed if you weren’t making the change.
Step four – With your contractor make a list of the adjustments you need to your estimate. Call your insurance adjuster and explain your adjustments one at a time. An experienced contractor will be able to help you with this process. Your goal is to come to a settlement for your claim that includes the full scope of repairs your insurance company owes you.
Once you have agreed on your settlement, you can now proceed with work on your home. Your contractor will prepare an estimate for what you want done and you can use your insurance settlement to offset your remodeling expenses.
Coverage Basics
A standard home insurance policy provides you with six different types of coverage. Each type of coverage has different policy limits and is designed to cover you for different things. Your deductible only applies once for a covered event, no matter how many of the below coverages are used.
- Coverage A – Coverage for your dwelling. This covers damage to your home in the event of a covered loss.
- Coverage B – This is coverage for other buildings on your property, like a shed, barn, or garage. Normally the limit on this coverage is 10% of your dwelling coverage.
- Coverage C – Coverage for personal property. This covers all of your belongings in your home, although there are important exclusions or caps on things like jewelry, guns, furs, and cash. Coverage for vehicles is normally excluded as well.
- Coverage D – Coverage for loss of use, also known as additional living expenses, or ALE. This coverage pays hotel and restaurant bills if you cannot use your home because of a covered loss.
- Coverage E – Personal Liability Coverage. This is coverage protects you if someone is hurt on your property.
- Coverage F – Medical Payments. This covers medical payments for invited guests that are injured on your property and do not wish to sue.
In addition, most policies include extra coverage for debris removal, trees, shrubs and plants, and Law and ordinance also known as code update. There are usually a few other goodies available as well.
By Jeff Britton
Too many homeowners don’t file a claim because they are afraid of their deductible. They may not have the money, and are afraid “paying your deductible” means money out of their pocket. That is not true.
Your insurance company will subtract your deductible from the total of your claim, so there are lots of ways to get your damage repaired, without spending a dime of your own money. These are legal and ethical, and in no way involve any kind of fraud.
Do some of the work yourself – There are lots of activities that need to be completed to bring your home to preloss condition. Cleaning, demolition and painting are generally pretty easy to do yourself. Discuss the job with your contractor and find one or two items you are comfortable doing yourself in exchange for credit on your bill.
You can choose less expensive replacement materials – For example if you have real wood flooring, you can replace with carpet or laminate, and keep the difference. Once your claim is documented, your settlement will be based on what was there before your loss, it is perfectly acceptable to make changes during the repair. Some people even use a loss as an opportunity to remodel.
Don’t replace all of your contents – We accumulate a lot of stuff in our homes that aren’t as useful as they once were – clothing, shoes, books, old video game systems, etc. If they are damaged you are entitled to be compensated for them. Take the money and don’t replace what you don’t need.
Act as your own general contractor – Insurance claims consist of several distinct parts. Emergency services and mitigation generally need to be done quickly to prevent further damage. Hire a restoration contractor to do those activities. Repairs are not so time sensitive, contract those yourself. Your insurance company will generally pay your claim based on standardized pricing, and if you can get the work done for less, you keep the difference.
Photo: Roy Barnett Jr. via Compfight
The decision to file a homeowner’s insurance claim should be taken seriously. Insurance companies track and share your claims history using the Comprehensive Loss Underwriting Exchange, or CLUE. A history of frequent claims can cause an insurance company to cancel your policy or raise your rates. Just an inquiry to your insurance company’s claims department can trigger an entry on your CLUE report, even if you don’t file a claim.
So how do you know if you should file a claim or not?
Add up your damage. Don’t underestimate either. Believe it or not, most people underestimate the cost to repair property damage. Here’s why –
Water damage is often hidden, it usually comes from inside walls, behind refrigerators, under dishwashers, behind washing machines, etc. It is hidden. By the time that puddle from your icemaker line makes it to the front of the refrigerator it has gone behind your cabinets, under walls, into your crawl space, and under your kitchen floor. First glance looks like a puddle, but a serious inspection will often show that you have moisture 20 feet or more from the source of the leak. That moisture will cause mold and rot, swelling and deterioration, and all kinds of problems if it isn’t treated quickly. There is a reason that the average water claim is $8000.00.
Water needs to be dried before repairs can be made. Prompt and thorough drying prevents problems later, minimizes health risks(more info), and costs a lot of money – even if you do it yourself. Before any repairs are even started plan on at least $1000 to dry your structure.
You can usually see fire damage, but smoke goes everywhere and gets on everything. Your nose gets desensitized to smoke odor very quickly, so you won’t smell smoke in the rest of your house until the worst of the damage is cleaned. You won’t notice the smoke smell on your clothes, but other people will. Cleaning smoke from your home and belongings is incredibly labor intensive, and becomes very expensive very quickly.
People don’t factor in all of the costs, or they don’t initially realize the amount of work a repair will require. A two foot by two foot section of damaged flooring usually means the whole floor needs to be replaced, which means all the furniture in the room needs to be moved and stored, and all the floor trim needs to be removed, put back, and painted, and if the floor is continuous to other rooms the same is true for those rooms too.
It’s easy to forget about labor – something like 75% of the cost of your home is labor, and some common activities are far higher. You can paint a room for fifty dollars worth of paint, but its $500 to get the pain on the walls.
People undervalue their contents – they often think in terms of garage sale prices, but the reality is you have replacement cost coverage for those items. Even a bag of old clothes headed for good will is worth a bunch of cash if they are damaged in an insurance claim.
So to decide whether or not to file an insurance claim –
Estimate the cost of your damage, drying, cleaning, personal property, materials, labor, etc., if the damage is more than your deductible, consider filing a claim. If you’re not sure, call us for advice.
By Jeff Britton
