It has been a month since Hurricane Harvey flooded the streets of Houston and surrounding areas devastating so many communities.  At this point you have already taken the first steps to filing a claim and beginning the recovery process.  You made temporary repairs to your home before leaving for other accommodations.  A few days after filing your claim an adjuster contacted you to schedule a day where he or she can tour your home to determine damages.  Before your visit your adjuster may have asked you to prepare an inventory of your home so you could have an idea of the cost to replace or repair your home.  You hired a licensed contractor who gave you a written bid with details of materials scheduled for use and prices.  Now that your claims adjuster has completed his visit what is your next step – your insurance claims payment.

Factors Determining Your Insurance Claims Payment

  • Type of Insurance Policy

Your homeowners or dwelling policy coverage is based on replacement cost or actual cash value.  Replacement cost policies replace damaged property with one of similar and quality without depreciation.  Property decreases in value due to age or wear and tear.  Actual cash value polices will pay amount needed to replace item minus depreciation.  Let’s use as an example, an eight-year-old washing machine damaged by a tree falling through the roof.  With replacement cost, the insurance company would replace your old washer with a new one.  If your policy is actual cash value, the insurance company would only pay for part of the cost of a new washing machine.  Reason being that the washing machine has been used for eight years and is worth less than its original cost.

  • Insurance Policy Limits

Insurance policies provide sufficient coverage including an inflation clause to keep up with increases in building costs and material.  If your home policy has replacement cost coverage your insurance company will pay for the full cost of repairing and replacing the damaged building.  Insurance companies recommend a property insured for 100 percent of replacement cost ensuring enough funds available to rebuild your home.

  • Rebuilding or Repairing Your Home

If you cannot live in your home, your insurance company will pay you in advance for additional living expenses.  Items typically covered are eating out, utilities installation in a temporary residence and transportation costs.  Whether you rebuild or repair your home, you must comply with building codes requiring structures built to minimum standards.  You also have the option to rebuild, rent a home, or an apartment.

Payment Process

Hurricane Harvey caused so much devastation and added pressure to insurance companies to meet claims deadline.  The first check you get from your insurance company is often an advance, you can always reopen the claim, filing for an additional amount if you find other damages.  If you cannot reach an agreement with your insurance company contact the claims department manager.  Make sure you have documentation to back up your claim requesting additional funds.  If after communicating this information you both still disagree, your policy allows for independent appraisers to choose a mediator.  The decision made by any two of these three people is binding and you along with your insurance company pay for appraiser sharing the costs.

You will received payment for damages to your home and personal property in two separate checks.  If you have a mortgagee, it will endorse the check and place funds in an escrow account and pay for repairs once work is completed.  You must show your mortgagee your contractor’s bid and state how much the contractor wants upfront to start working on your home.  Your mortgagee will also inspect the work done on your home before realizing any funds to pay the contractor.  Other contractors may want to deal with your insurance company directly for payment of services.  If this is the case, you will need to inspect the work and be satisfied with the job before signing any forms.  If your personal property had replacement cost, you will need to replace damaged items before your insurance company disburses funds.

After your claim has been settled take time to re-evaluate your insurance policy checking for adequate coverage.  Call us if you have any questions or for a new homeowners quote.  And do not forget to add flood coverage to your home protecting it in the future.