After the fire, tornado or runaway truck has wiped out your home (and you’ve thanked your lucky stars that you survived and paid your homeowners insurance premium), it’s time to think about putting your life back together. Chances are this is a first for you. Your lack of experience dealing with insurance and a disaster of biblical proportions can put you at a distinct and potentially costly disadvantage. Here are some things you need to know when filing a big claim on your homeowners’ insurance policy.
First on all, you don’t have to live like a refuge while your home is being repaired. Standard homeowners’ policies typically foot the bill for additional living expenses if your home is uninhabitable. That coverage includes temporary lodging, meals and any transportation costs incurred. Just be sure to save all your receipts.
Hang tough. You may be tempted to get it over with and take whatever you’re offered, especially if your damage was extensive and the claim process has dragged on. This is one time when patience isn’t just a virtue, it’s smart business. Never under any circumstances sign a release on your claim. Doing so releases your insurance company from making payments relative to your claim that might arise in the future. You aren’t legally or contractually obligated to sign such a document, so don’t do it. In the same vein, don’t cash a check from your insurance company that’s designated as full and final settlement. If you do that and then discover two months down the road that something wasn’t paid for, you’re out of luck.
You may a homeowners’ policy that entitles you to reimbursement for the replacement cost of any lost or damaged items, but your insurer may issue a check for the cash value (which includes depreciation or doesn’t take into account today’s prices). Here again, save all your receipts as you begin replacing items and submit them so you can be reimbursed for any difference between cash value and replacement cost.
You may be better off claiming your damaged home as a total loss instead of trying to rebuild it. For most homes, new construction is going to be cheaper than repairing extensive damage.
Insurance checks for major construction are typically made out to you and your mortgage holder. You’ll have to endorse the check and send it along to your lender, who will place it in escrow and disburse the funds incrementally as construction progresses.
As always, it pays to review your homeowners’ insurance policy carefully so that you understand what to expect and what you’re entitled to in the event you have to file a big ticket claim.