What to Do If the Insurer Demands a Final Proof of Loss
A growing issue that we’re seeing in insurance claims has to do with the Proof of Loss. Insurance companies are beginning to ask for a final Proof of Loss before any funds are paid out. As we’ll see, this can pose a problem for homeowners who have been through a serious loss, and it can feel like an unfair pressure tactic.
The insurance company should not demand this document from you while withholding all forms of payment. They should provide some type of cash advance to help you meet immediate expenses and so you can begin replacing lost belongings. They should also not demand a final version of this document before they provide an interim set of funds so that you and your family can start getting back on your feet.
We’re going to take a look at what you need to know about your Proof of Loss, what’s fair for the insurance company to ask of you, and the rights and responsibilities both you and the insurance company have during a claim.
What Is a Proof of Loss?
In brief, a Proof of Loss is a document filled out by the homeowner that outlines all of the property and belongings that were lost or damaged. It substantiates the value of lost and damaged property and may provide supporting evidence, such as receipts.
When you make an insurance claim, the Proof of Loss form is how you formally justify your damages to the insurance company.
There is no set standard across insurance companies about this document. There’s no agreement on what it should look like, and it often depends on the insurer. However, it is a critical document in your insurance claim and should not be rushed.
Recently, we have seen a trend where minor errors on a Proof of Loss can lead to a wide range of problems for policyholders.
What Can You Do When Your Insurance Company Demands a Final Proof of Loss?
What we have been seeing more often is insurance companies demanding a Final Proof of Loss before providing any funds to a policyholder. A home insurance contract is a peace of mind contract, where you are supposed to be protected against financial pressure. When you think of the fundamental reason we all have insurance, it is to be protected financially if something unforeseen takes place. If your Insurer is not providing an interim payment of funds, we suggest raising these basic arguments.
More importantly, there is no need to sign off on a Final Proof of Loss to be able to obtain funds. Simply ask your Insurer for an Interim Proof of Loss so that you can receive at least a portion of the funds, while you consider your options.
Putting together a Proof of Loss, which needs to include all of your lost belongings, is not just time-consuming, it can also be emotional. You want to make sure that it’s thorough and complete. If you leave any damages or lost property off, you will not be reimbursed for them.
If the Insurer is denying you any type of advance, or will not accept an Interim Proof of Loss, they may be encroaching on the legal duty to act with the utmost good faith. As the sophisticated party, the Insurer has an obligation not to take advantage of a vulnerable party. With that in mind, you should be able to receive at least some funds while you try to resolve your insurance claim.
What you should be able to do is sign an interim Proof of Loss, giving the insurance company something to work with. This should give you access to funds sooner so that you can cover costs like ALEs (Additional Living Expenses) and replacing contents. It doesn’t have to be final, and you can revise it before you sign off.
What Is the Interim Proof of Loss Used For?
The interim Proof of Loss is a useful way to proceed with your claim and start rebuilding when you have a structural dispute or another disagreement with the insurance company. Commonly, we see homeowners who believe that their home should be rebuilt, while the insurance company only wants to do repairs. That can lead to a large gap in terms of what the homeowner expects compared to what the insurance company wants to pay, and it can take time before both parties come to an agreement.
In the meantime, you want to start moving ahead with things like fire damage restoration and replacing lost belongings like electronics and clothing. You’re also facing Additional Living Expenses such as hotel or rental costs. You want a cash advance or part of the funds from the settlement without having to agree to a final Proof of Loss under pressure.
Another common theme with home insurance claims is that sometimes a structure needs to be opened up to see the extent of the damage. If that is the situation, you do not want to agree to a final damages figure before knowing the full extent of the damage. An Interim Proof of Loss provides the flexibility necessary to advance matters, while still leaving your claim open.
An Interim Proof of Loss is a fair compromise and one that the insurance company should accept. You don’t have to let the insurance company bully you if you’re unsatisfied with the settlement they have offered. Instead of accepting a low offer because you need the money urgently or want to move on with your life, you can push back and get access to funds without agreeing to a final amount. An Interim Proof of Loss helps get the ball rolling.
When Do You Have to Sign a Final Proof of Loss?
Homeowners have 2 years to move forward with their claim and sign a final Proof of Loss. Some insurers incorrectly rely on a 1-year period due to outdated legislation and may expect you to follow their timeline. It is critical to know whether your Insurer is relying on a 1-year limitation period or a 2-year limitation period. You will have to sign your final Proof of Loss eventually. There have been cases where failure to sign a final Proof of Loss after two years has led to the closure of your claim or a triggering of the Dispute Resolution Process.
During the Dispute Resolution process, an umpire will make the final decision on any aspects of a claim that the homeowner and insurer cannot agree on. Our team always advocates for working with the Insurer to avoid the Dispute Resolution process, however sometimes it is necessary to obtain a fair amount from a difficult insurance company or adjuster.
The insurance company cannot tell you that you do not receive funds if you do not sign off on a Final Proof of Loss. You should be able to access some funds in the interim. Once a Proof of Loss has been provided to the insurance company, they have the right to ask for an examination under oath. It’s worth taking the time to make sure your Proof of Loss is complete and accurate, while still getting access to interim funds so that you are not under any financial stress.