We have a customer that is currently going through a total loss fire and have had customers go through large fire losses throughout the history of the agency. This is a terrible tragedy and a very difficult process to go through. If you have insurance, you can alleviate the financial burden but the emotional burden can still be overwhelming. It also takes a lot of your time for a very long time. There is no way around it. Fire is a very costly disaster from the amount of time involved and from a financial and emotional perspective.
If this tragedy befalls you and your family, what do you do? What can you expect from the insurance company? What can you expect from the contractor? Let’s take a look at these questions and try to give you a rough guide through a large fire loss.
The first and most important step is to immediately call the fire department!!! If you’re reading this blog, I’m going to assume you’re past this point. So now what? You contact your agent (hopefully us!) and they submit the claim. You will be contacted by an adjuster who will help walk you through the process and what they need from you. They will need to perform an inspection of the damages. This includes a Cause and Origin investigation (C&O or O&C are common ways of abbreviating this report). The goal of this investigation is to determine what the exact cause of the fire was. There are several reasons for this investigation. Some people do actually burn their houses down to collect money from the insurance company. This is fraud and comes with enormous fines and jail time. Not fun. Some people try to burn down other people’s houses. This is arson and comes with enormous fines and jail time. Also not fun. Another result of this investigation is that the cause of the fire was the negligence of a third party. For example, a light fixture malfunctions and sparks causing the fire. The insurance company will pay for your claim and then seek payment from the manufacturer/designer of this light fixture or the person that installed the light fixture. That way the person ultimately responsible for the damages pays for it. By far the most common cause of fires are either your negligence (covered so don’t worry) or undetermined (The investigators can’t tell, with certainty, what caused the fire).
They adjuster will also develop a scope of damages and sometimes an estimate for the repair/replacement. It is also common to have funds advanced to you at this point to help pay for anything that burned up (clothes, etc.) and somewhere to stay until repairs are completed. This is where you start to really get involved in several areas.
1. Pick your contractor(s) – This can be a tough decision but should be made early and quickly while still doing thorough research on your options. You can pick individual contractors to do mitigation, debris removal, property replacement/dry cleaning and reconstruction. There are also companies that do all of this for you. The choice is yours. Pick a company(s) that is local and reputable so it’s easy for you to work through any disputes and they’ll stick by their work.
2. Itemize you inventory – This is one of the most time consuming parts of a fire claim. You need to itemize everything you have in your home (preferably including how old it is, what its worth and what it would cost to replace). The trick is not necessarily proving what you had to your adjuster but simply trying to remember everything you had. This can be very difficult if you don’t have records of your home (photos, receipts, videos, etc.) that survive the fire. This is your responsibility so be as thorough as you can so you do not miss out on funds that can be utilized from your policy. It also helps to inventory by room to keep everything straight.
3. Coordinate with your adjuster – Remember, you are the only person to authorize repairs/replacement during your claim. You are still the boss! However, if you are using the insurance company’s money, you do need to get your decisions and those of your contractor approved to receive full reimbursement. It’s ok to purchase something that is better than what you had or build a nicer house that what you had. You just have to know that you will pay the difference between what you had and the cost of the upgrade.
Whenever possible, you should only be making final decisions. If the adjuster says you need to put a certain type a cabinet back in and the contractor says he can’t do that because of “xyz”, you should avoid relaying this between the contractor and the adjuster. Have the adjuster call the contractor or vice versa and then report back to you with their agreement so you can make the decision. If they disagree, then you should get involved so you can make the decision. Be warned: Disagreements will happen! It is rare that three different parties can always agree all the way through building, repairing or rebuilding a home. You have the final decision with all matters since it is your home but you need to understand if that final decision is not agreed upon by the adjuster, you may be using funds out of your pocket. Again, this is absolutely ok if it is what you choose to do.
Your contractor and adjuster cannot do everything for you on a claim but both should make the claim easier on you. When choosing your contractor, you’ll want to know if they have worked on insurance claims before. If they have not, that’s ok but you need to understand that it will be a first time for them as well as you. If the contractor has done insurance work, they can be a huge help coordinating repairs with the adjuster. Rely on both the contractor’s and adjuster’s experience but as I stated before, remember you are the boss, all final decisions are up to you and it’s your house!
How about getting paid? After all, that’s what the insurance is for! (Everything will be discussed in terms of Replacement Cost coverage as this is most typical on a Homeowners Policy.) We’ll break this down into three areas: Building, Personal Property (your stuff) and Additional Expense.
The Building payments will usually come in two or more checks. The first check will be for the Actual Cash Value payment on your home. This is what you are owed until the home is actually replaced. Once the construction is completed, the adjuster, the building inspector and anyone else who needs to will inspect your home. If it passes inspections, you’ll get another check for the balance. If it doesn’t and more work needs to be done or you discover things down the road (related to the claim), there will be additional checks to compensate for these additional costs.
Do you have to rebuild the home exactly as it was? Exactly where it was? Can you just buy a new house? No, no and yes! The insurance company owes to replace the home as it was before the loss. However, you can make changes approved by the adjuster or that you are willing to pay for out of your pocket. You can build you house in a new location as well! The insurance company will obviously not pay for the new lot and they still only owe for what you had. You can also just buy a house if rebuilding sounds like too much of a burden. Again, they will only owe to help buy a house that is equivalent to the home you had. Communicate with the adjuster and they will help you with these decisions.
The Personal Property portion of a claim is usually the more intensive reimbursement process. As we discussed above, you will need to get an inventory of all of your stuff to the adjuster. The adjuster will then pay you the Actual Cash Value (depreciated amount or roughly what the items are worth) up front. You will then get receipts as items are replaced and send them to the adjuster for reimbursement of the full replacement cost. This can be done anywhere from one item at a time to all items at the end of the claim. Most commonly, it’ll be done it batches throughout the claim. You can also arrange to just get the replacement cost purchase as you buy items. How the payments come is just a matter of communication with the adjuster. When you submit receipts, make sure they correspond to the inventory forms you completed (For a receipt purchasing Item 1 on Page 1, list Item 1 and Page 1 on the receipt and submit receipts in numerical order). This will make it easier for the adjuster to review which means a faster payment for you!
The Additional Expense is the cost for you to stay somewhere while the rebuild is being completed. This is typically reimbursed monthly as the rent is paid. You can arrange to have this paid differently as well. Again, it’s just communication with the adjuster. This also pays any difference in food costs you suffer as well. For example, if you do not have the ability to cook food and eat out every day, your food costs will be higher. If your normal monthly food cost is $500 but you spend $800 on eating out because you cannot cook, you can be reimbursed for the difference, $300. You will not be reimbursed for all meals, the $800 as you only get the difference.
Keep a running tab of all payments you receive. This will help you reconcile what you actually received vs what you should have received at the end of a claim. The adjuster will do the same thing but they are human and mistakes can be made. Make sure you are receiving all the funds you deserve to be paid from your insurance policy.
I hope this gives you a helpful guide if you suffer a total fire loss. To help prepare before this happens to you, try some of the following things:
· Take pictures or videos to document items you own.
· Walk room by room, making notes and taking videos/pictures. Don’t forget things like artwork, bedding, clothing, books, etc. Document everything!
· Prepare an inventory list. If you do this accurately, you’ll have much less work when a claim happens as this is the most time consuming part of the claim for you.
· Record extra detail on any high value items like guns, antiques, artwork and jewelry.
· Don’t forget to document items in your garage or storage sheds for things you have not in your home.
Before, during and after any claim, contact us at the Frederick Agency! We’re here to help! Most of us will never experience a claim in our lifetime. If you have a large claim, chances are it will be your only one. Lean on us to help you through this tough time. We can make sure you have the proper coverage before a claim happens, walk you through what to do during a claim as well as help with questions and issues and then we can review our service, the adjuster’s service and your coverages after a loss to make sure we fix any issues that need to be address. Call for a free review and quote today at 419-732-3171!
By Brennan Madison