Structural damage to your home is one of the most expensive consequences of a fire and managing the rebuild or repair process will be one of the most important aspects you’ll negotiate with your insurance company. You should know:
- How you are going to be compensated;
- how the repairs will be completed;
- and your rights when dealing with the insurance company.
In this article, we will lay out many of the things you need to know about the rebuild and repair process after a house fire.
How Your Insurance Company Estimates the Costs
First, the Insurer will have a Scope of Work prepared. A Scope of Work is an outline of all of the repair or rebuild elements that need to be accomplished. A Scope of Work is very detailed and often indicates measurements and recommended building materials.
In order to estimate the cost of the repairs or rebuild, an insurance company will send the Scope of Work to a handful of their preferred or usual contractors. Those contractors will use the Scope of Work to bid or estimate a figure that they believe it will cost to complete everything listed. The insurance company will use the lowest bid as the baseline figure. Policyholders must act quickly to ensure they have the opportunity to be a part of this process before the baseline figure it set. Policyholders do have some rights in the determination of how the repairs are made.
Who Completes the Repairs?
The answer to this question depends in large part on your insurance company’s own procedures and may differ from company to company. Some insurance companies will “pay you out” according to the baseline figure and leave you in charge of organizing and completing the repairs. Other companies will have their own list of contractors and hire one of them to do the work for that baseline figure.
In addition to the repairs required on your home itself, your insurance policy may also include similar coverage for exterior structures such as a shed or a detached garage if they were also damaged as a result of the fire. Home insurance policies generally cover all structures on the property, but it pays to familiarize yourself with your policy and any policy limits that could leave you paying any of the repairs out of pocket.
What the Insurance Company Will Repair
Many house fires result in only partial damage to your home, a situation that can lead to disagreements over exactly what the insurance company should pay for. For example, if a fire damages the siding and windows on one half of the house, but not the other, the insurance company will often insist that it only needs to repair the damaged half.
However, a home with half new siding and windows, and half older siding and windows that don’t match will look erratic. Homes that appear erratic may have decreased property value. You can ask the insurance company to redo the entire house with consistent finishing.
The purpose of home insurance is to restore your home to its pre-fire condition, including its property value. If the repairs offered by your insurance company could lead to a decrease in the value of your home, you should consider asking for more; and we can help you.
Guaranteed Replacement Cost
Every insurance policy has a listed monetary limit, and most policies have separate limits for each of the three main areas of coverage (Additional Living Expenses, Personal Property and Contents, and Structure/Dwelling). Your Structure/Dwelling limit is the maximum amount that the insurance company will contribute to the repair or rebuild of your home; whether they are paying that to you and letting you organize the repairs, or if they are paying a contractor directly. If you have a $300,000 limit, that may be the most you can receive from your insurance company, regardless of the actual cost of repairs.
Guaranteed Replacement Cost is an optional insurance term which extends your limits. With Guaranteed Replacement Cost, the insurer will rebuild or repair your home to pre-fire conditions even if those costs are beyond the limits outlined in your insurance policy. It is your insurer’s responsibility to restore your home to pre-fire condition. Guaranteed Replacement Cost ensures that monetary limits do not stand in the way of achieving a home in the same state it was in before the fire.
It is important to keep in mind that Guaranteed Replacement Cost does not mean that the insurer pays you for the value of your home. The insurer pays the cost to rebuild your home including materials and labour.
Replacement Cost may also be relevant to Personal Property and Contents. You can find more information about replacement cost terms as they pertain to contents on our website or by giving us a call.
Negotiating Your Home Insurance Offer
The offer your insurer provides as part of Structure/Dwelling coverage is based on the bids they received along with some analysis and recommendation from the insurance adjuster. The insurance adjuster is an employee or independent contractor hired by the insurer to assess the damage to the structure, and they often want to save their employers’ money. One of the first times you meet the insurance adjuster will be to walk through your home and inspect the damage.
If dealing with insurance adjusters leaves you anxious or uncertain as to whether you are taking the right steps to receive fulsome compensation, talk to someone who can help. We understand what you’re going through and we have made it our mission to help families like yours negotiate with their insurance companies.
Our aim is to negotiate with the insurance company to provide you with fair compensation that allows you to properly rebuild your home and get back to your everyday life. We negotiate with the intent of avoiding arbitration, but we are prepared to see our client’s cases through the alternative dispute resolution process and/or the legal process where necessary.