Claims Help for Homeowners

How to take care of the basics

* PLEASE NOTE IMPORTANT FOOTNOTES AND DISCLOSURES.

1.      Call the agent. Claimants should report any loss to their insurance agent as soon as possible. Delaying notification could endanger the claim. Insurance companies are quick to get to a disaster area, setting up hotlines, temporary offices, and mobilizing thousands of adjusters to cope with the claims.

2.      Take notes. At the same time, claimants should start documenting their communications with the insurance carrier, recommends George Kehrer, executive director of Community Assisting Recovery, Inc. (CARe), a nonprofit organization dedicated to helping homeowners recover from disasters. "Get a notebook. Note the time and date of each conversation you have with your carrier and what you discussed. Hopefully, nothing will come of it, but you can be sure that the insurance company is storing every piece of information on you," says Kehrer.

3.      Get a copy of the insurance policy. If your clients don't have a copy of their policy in their "bug-out bag," have them call their agent or go to the nearest office and get their policy number, a copy of the declarations page, and a complete copy of their homeowner's policy. If they can't get a copy of their specific policy right away, ask for a typical one until their policy can be sent. Then you and your clients should go through each page with a highlighter to determine what's covered and what's not. "You'll be learning Insurance 101," says Kehrer. "But you have to step through it to know your rights."

4.      Get cash. The first place to find cash is in the homeowner's policy. Most carriers offer additional living expenses (ALE) for up to 12 months from the date of the catastrophe. Generally, policies cover up to 20% of the insured amount, although some may provide unlimited "loss of use" amounts. Besides hotels and meals, ALE can cover the cost of utilities, extra transportation, child and animal care, and other expenses—even if clients are living with relatives. Usually cash advances are available immediately after a disaster.

Other sources of quick cash are home equity lines of credit, margin accounts, employee assistance programs, disaster assistance, and perhaps hardship withdrawals or loans from a 401(k).

Disaster victims should also register with the Federal Emergency Management Agency (FEMA) to see if they're eligible for cash assistance, among other things. FEMA offers $2,000 to each household affected by a disaster. However, assistance is based on need.

5.      Secure housing. Depending on the scope of the damage, clients may need to be prepared for prolonged homelessness.

A variety of factors may prevent clients from getting back into their homes. Officials can close entire neighborhoods to everyone for several weeks after the storm and kept it closed to the public for another four to five months. Finding contractors to come out and repair the damage took time, and they, in turn, were hindered by a shortage of construction supplies.

6.      Notify your creditors. Clients living in temporary housing may need to get a P.O. box to ensure they get their mail regularly. If they have secured more permanent housing, they should put in a forwarding address and notify their utility companies and creditors of the loss and the new address.

Assessing the damage

Once basic needs are handled, clients face the difficult job of assessing and documenting the property loss. Legally, the burden to prove the loss is on the homeowner—an area rife with pitfalls for clients who have never before gone through the process.

1.      Document all expenses. Clients should start documenting their expenses as soon as they can. "Save everything," says Stewart. "Put your receipts somewhere where they won't fade—you will need them. And not just charge card receipts."

2.      Get back copies of bank and credit card statements. ALE is paid based on the difference between a homeowner's living expenses before the loss and after the loss. Insurance companies will want to see proof of how much your clients spent on shelter, clothing, and so on, before they will reimburse for post-disaster living expenses.

3.      List the losses. Clients can start completing their personal property inventory even if they can't get back into their homes. To help jog their memories, have clients mentally work through each room of the house, contact people who may have photos of the home, think about what was in closets, drawers, and garages, and include the age of each item and the price paid. Hopefully clients will also have videos, print records, and receipts in a safe place to back up their claims.

4.      Get a digital camera. Once clients can get into the structure, encourage them to take plenty of pictures of the damages, says Ron Papa, a public adjuster and past president of the National Association of Public Insurance Adjusters (NAPIA). "Take pictures of everything, including the food in the refrigerator—a reimbursable expense."

5.      Protect the property. Encourage clients to make temporary repairs such as getting water off the floors, finding and stopping leaks, pulling carpets up, boarding up the house, and salvaging whatever possible. "People are often told not to move or throw anything away," says Papa. "However, homeowners have a duty to protect their property. If they don't, the company can claim the homeowner didn't act prudently and deny the claim." Clients should document their work, save their receipts, and, as much as possible, get the adjuster to sign off on repairs and debris removal.

6.      Complete the "proof-of-loss" estimate. About 15 days after a loss is reported, the insurance company will send the policyholder a "proof-of-loss" or "scope-of-loss" form. The carrier will use this document to help decide the value of the claim. The scope-of-loss should list every single item the homeowner needs to rebuild the house, along with its estimated cost at post-disaster prices. Clients generally have about 90 days to complete the estimate. (See the Resource section below for several sample proof-of-loss forms.)

The insurance adjuster will also prepare his estimate of the cost. His estimate forms the basis of the carrier's offer and might differ significantly from the homeowner's estimate. "The adjuster will hand you several pages that look complete and consist of what they think the losses are," says Kehrer. "However, their estimate will focus on the house you will be building, not reconstructing the house you lost—an important distinction. Suppose, for example, you had a 1920s home. You are entitled to 'like kind and quality,' but they will budget in drywall rather than the more expensive plaster."

Clients should hire outside experts to estimate what it will take to restore the house to its former condition. "Hire contractors and other experts who have no links to either the client or the insurance company and who have experience with insurance claims," says Kehrer. "Even better, find one who has defended his estimate in court in the homeowner's favor."

Working with the insurance company

Insurance companies have a contract with the homeowner, and while they will fulfill their obligations, they will also try to minimize the cost. This means it's up to the insured to fight for their coverage. Help clients understand how they will have to work with adjusters and their carriers.

1.      Don't sign off early on claims. It's tempting to take the first check offered, but settling too early can cost homeowners dearly. "It may look like a lot of money," says Kehrer, "but the homeowners could be out tens of thousands of dollars once the hidden damages are discovered."

Water, in particular, can cause a lot of hidden damage. It takes time for wet insulation to ruin the drywall or kitchen cabinets to warp from the rain. "You never want to resolve a loss immediately," says Papa. "Owners may not realize the extent of the damage, and in a disaster like Katrina, not all of it has happened yet."

Nor will the adjuster budget potential damages into his estimate. "He won't consider anything he can't see," says Kehrer. "And he's not going to pull out the drywall or pick up the carpet."

2.      Be alert to the adjuster's conflict of interest. Claimants need to realize that adjusters are supposed to close as many cases as possible, as quickly as possible. "The adjuster's job is to buy the claim at the least expense for the insurance company," says Kehrer.

So it's not surprising that adjusters often make a good first impression. "Adjusters are nice," says Kehrer. "Almost everyone will tell you, especially at first, how nice they are. However, adjusters are very well trained—they have been playing this game for decades and have been through lots of hurricanes and floods. They know it's hard to get to the homeowner's wallet if they are mean."

Kehrer recommends being polite, fair, and honest with adjusters, but to get everything in writing and take notes on all conversations. Don't let adjusters negotiate clients' claims with the contractor, and don't let clients sign any releases until you are satisfied they've received what they're due. "Settling a claim is a long process," says Kehrer. "But the longer the homeowner stays in it, the better results they'll get."

3.      Fight for the coverage. Many insurance disputes center around how the home was damaged. Water damage, for example, can come either from above (as in rain poured into the house after the roof blew off) or below (floods caused the house to move off its foundations). Water damage from above is covered under the homeowner's policy and the insurance company pays. Water damage from below is covered by flood insurance—something many homeowners don't have and which the federal government pays.

"Homeowners will have to fight for wind and rain," says Kehrer. "So don't take no for an answer—and don't take the next no, either." In fact, clients need to be very vocal in disagreeing with an adjuster's decisions. They will automatically assume silence indicates consent, says Kehrer, and their files will note the fact that "the homeowner agreed."

Resources

Sample scope-of-loss

Sample proof-of-loss

FEMA proof-of-loss form (flooding)

Sample personal property inventory

Policyholders of America

Community Assistance Recovery, Inc. (CARe)

Federal Emergency Management Agency (FEMA)

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