Updated: 11/2/2010 9:00 AM ET|
9 secrets of home insurance claims
What you don't know about filing a homeowners insurance claim after serious damage can definitely hurt you. Don't get caught by these common surprises.
You're at a disadvantage when you have major house damage or a total loss of your home. You face a home insurance claim process that could easily stretch out for more than a year, require reams of paperwork and leave you exhausted.
Unless you've already run the gantlet of a major home insurance claim, you don't know what to expect. We asked Ron Reitz, the president of Quality Claims Management in San Diego, to give us an inside look at what, many times, is an eye-opening process for policyholders.
Reitz helps policyholders work through the insurance claim process and shows them how to recoup their losses. "Most people don't learn anything about insurance until they have a loss," Reitz says.
Public adjusters work on behalf of policyholders to help people get all they're entitled to from insurance claims. Adjusters help evaluate damage and rebuilding costs, track the flow of insurance payments and amounts due, and work with home insurance companies to expedite their clients' insurance claims.
Here is a look at many of the things that can take people by surprise when they have a large home insurance claim:
1. A claim for a total loss of a house can cost less than rebuilding a damaged house.
Construction from scratch costs less per square foot than construction for rebuilding. Often it's "easier" to fix your problem if your house is simply gone, rather than to try to repair the damaged sections of what's left.
"When you start from scratch, you don't have to incorporate changes that exist with the building, so you have a clean slate," Reitz says. Also, it's often more costly to retrofit your old house to prevailing code than to start fresh.
2. If you have a mortgage, your insurance checks will be made out to both you and your mortgage bank.
Your mortgage holder is likely listed as a "loss payee" on your home insurance policy, so payments for rebuilding are issued to both you and your lien holder. And don't expect your mortgage holder to sign over the check to you.
Policyholders "have to endorse and send the check to the mortgage company, and it will sit in escrow until repairs are made," Reitz says. Mortgage banks typically release the funds back to you in three installments over the course of your reconstruction. Mortgage companies want to be sure your property is repaired before releasing payment to you. As a result, you may have to advance your own money for construction costs until the mortgage company verifies the repairs.
3. Don't cash any insurance checks marked "full and final settlement."
In some states, such as California, it's illegal for an insurer to issue a check like this. You don't want to cut yourself off from any funds you'd be entitled to if you later discover that not everything has been paid for.
4. Don't sign a release on your home insurance claim.
This takes the home insurer off the hook for any future payments on your claim.
"Insurance companies ask the insured to do it when they think there's a problem or big dispute coming," Reitz says. The home insurance policy does not require the insured to execute a release, so why should you sign?
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