Homeowners Insurance Claims 101

A man reviews his policy before making a homeowners insurance claim

When you begin the process of filing a homeowners insurance claim, it can feel like a high mountain to climb. In addition to dealing with the damage and potential displacement from your home, you have to deal with an insurance adjuster, the insurance company, paperwork, and deadlines. It can  often feel like too much to handle.

We are going to look at all the basics of homeowners insurance claims, from the start of the process to the settlement, so that you know what to expect and how to make the process go as smoothly as possible.

How Homeowners Insurance Claims Work

The homeowners insurance claims process can be time-consuming and complex. If the claim amount is sizable or you are struggling to work with your insurance company, an insurance lawyer can help you through every step of the claims process. Contacting an insurance lawyer early on in the process can save you a great deal of time and stress.

#1 Contact Your Insurance Company Immediately

The first step you should take after a loss is contacting your insurance company. If you are not sure when to file a homeowners insurance claim, the answer is: as soon as you can. It is your responsibility to inform the insurance company promptly after the loss. Failure to do so can even put the success of your claim at risk.

Once you contact your insurance company, one of their adjusters will be assigned to your file and begin work on your claim. For the next few steps, they will be your primary point of contact.

#2 Review Your Homeowners Insurance Policy

As you file your claim, you should also familiarize yourself with the details of your policy. Your long-form policy will show you how well protected you are against loss. It includes important information, such as:

Deductibles: This is the amount you have to pay out of pocket before your insurance kicks in to cover the costs.

Coverage Limits: Most policies will have an upper limit that they will pay out. You will be responsible for any additional costs beyond that limit. These limits usually go up each year you renew, but with inflation and construction costs rising, you may need to be careful managing your repair costs and making sure you get the full amount to which you are entitled.

Replacement Cost or Actual Cash Value: The type of coverage you have will also make a significant difference in terms of how much you can expect to receive from the insurer. If your policy covers the replacement cost, lost property is insured for the cost to replace it. With actual cash value coverage (“ACV”), you are insured for the value of lost belongings at the time of the loss, taking depreciation into consideration. ACV coverage usually means a lower payment from the insurer and higher out-of-pocket expenses for you as you begin replacing your items.

#3 Document the Extent of the Damage

Once it’s safe to enter your home, it can help to make your own documentation of any damages. During the rebuilding process, the full extent of the damage will be lost, and you may need to fall back on documentation if you have a disagreement with your insurer.

There are several ways to document the losses. Start by taking photos of damaged areas and belongings. You can also take a video, and you may want to write down more details for context.

A model home and calculator on top of an insurance policy

#4 Submit Your Schedule  of Loss

An important element of your fire insurance coverage is your Contents insurance. This part of your policy replaces lost belongings, including:

  • Furniture
  • Electronics
  • Clothing
  • Media
  • Appliances
  • Dry and frozen foods

Contents insurance is also likely to be one of the larger parts of renter’s insurance (alongside liability coverage), as they do not cover structural damage to the property.

A Schedule of Loss is a complete list of all the personal belongings you have lost. You will submit it to the adjuster, who will use it when they recommend a payout amount to the insurer. In a major fire or total loss, you may have to rely on memory to create this list.

As you try to put together your Schedule of Loss, it is helpful to search through (and include) receipts for purchases, as well as asking family members and including photos. Once you submit a final Schedule of Loss, you can no longer add to the list.

#5 Review the Insurer’s Offer

Once the damage has been assessed and you have submitted your Schedule of Loss, the insurer will send you an offer on your homeowners insurance claim. This is where it can help to have a lawyer help you. They are very familiar with home fire insurance policies and homeowners insurance claims. If you feel like you have not received a fair offer, they can help you in the negotiation process.

#6 Hold onto Your Receipts

In addition to Structure and Contents insurance, your policy also includes Additional Living Expenses. This covers the costs related to being displaced from your home while the damage is repaired. It includes costs such as:

  • Staying in a hotel/motel
  • The cost of takeout during that stay
  • Renting an apartment or condo
  • Storage Costs
  • Additional transportation costs

Keep and organize your receipts for all of these costs to be reimbursed.

#7 How the Settlement Is Disbursed

How the insurer’s offer is disbursed may be just as important as the amount. Typically, insurers do not provide the full amount up front.

For Contents, insurers usually expect you to replace the lost item first and then submit a receipt. When it comes to Structure insurance, usually, the insurer will pay builders in three stages:

  • At the beginning of the project.
  • When 50% of construction has been completed.
  • When 100% of construction has been completed.

Depending on the circumstances, the insurer may send this money directly to the builder. In other cases, the funds may go to your mortgage lender first, as they may be co-payable on your insurance policy.

There are cases where homeowners want to take a home insurance claim cash settlement. This is where the insurance company provides a lump sum payment that homeowners can use to spend as they want.

You can also take a cash settlement for just part of the claim. For example, you may want the insurance company to handle payments for contractors but take a cash settlement for the Contents portion of your claim. This allows you to spend your settlement the way you want when replacing your belongings, rather than replacing everything and providing receipts.

If you have more homeowners insurance claims questions, or you need help filing a homeowners insurance claim, contact us to talk about the details of your claim.