This is meant to be an overview of understanding your homeowner’s insurance policy and the process for filing an insurance claim for damage to your home.
Document and Stop the Damage
When your property is damaged, immediately take photos and videos of all damaged areas and goods. Then, if possible, secure whatever is causing the damage. If it’s a plumbing leak, turn the water off. If it’s a roof leak, get the roof tarped as soon as possible, etc. Most insurance companies have a clause in their policies that the customer is responsible for preventing secondary or additional damage.
Know your policy
You should be receiving an annual statement from your homeowner’s insurance carrier that contains your coverage and recommends that you review the amounts.
If your policy was issued more than 5 years ago, I would strongly recommend that you review the limits listed under these items
Coverage A – Dwelling
This covers the replacement cost of rebuilding your home. Most of us don’t know what it costs to rebuild a home at today’s construction costs. If your policy was issued more than 5 years ago, it would be a good idea to get an assessment of what it would cost to demo and rebuild if it were a total loss, such as in a fire.
Coverage B – Other Structures
Do you have any outbuildings, shops, etc., that may be affected? If so, same concerns as item A.
Coverage C – Personal Property
Make an honest assessment of what it would cost to replace your personal belongings, furniture, clothes, jewelry, etc. Take photos of expensive items, and room-by-room photos aren’t a bad idea. Ensure you have adequate coverage at today’s rates to replace items.
Coverage D – Loss of Use
Confirm included items with your carrier and ensure the coverage is adequate. This may include temporary housing allowances. Alternate housing limits may be critical in the event of significant damage to your home. As an example, if a significant portion of your home is damaged in a fire, it may be necessary for your contractor to obtain engineering and permits prior to being able to initiate repairs. This can add a significant amount of time to the rebuilding process. A displacement of six to twelve months is not unheard of.
Policy Deductible –
It is always tempting to push the deductible high to reduce policy costs. Never push the deductible higher than you can afford to pay without warning in an emergency.
Supplemental Coverage Indicators:
Water Backup, Limited Water Coverage, Mold
These three all have similar concerns.
The average cost of water restoration/mitigation for a flood is between 5,000 and 11,000 if you have a restoration/mitigation company come in to dry out your house following a water intrusion, be It from a damaged roof, failed water supply line, or flooding from outside of the home. The costs can go higher depending on the nature of the damage.
The average cost of mold restoration/mitigation can range from 2,500 to 10,000. The costs can go higher depending on the extent of the affected area.
Not all water leaks resulting in damage are covered by all insurance companies. Commonly, they provide coverage for damage caused by “sudden and catastrophic” loss. If your source of leak isn’t covered, they may not cover your subsequent damage, including the water and or mold restoration/mitigation.
Your insurance company may or may not have a contract with a particular restoration/mitigation company. Regardless, when the restoration/mitigation company has you sign a contract for the restoration/mitigation, and they always will, the fine print will say that you are responsible for any restoration/mitigation costs not covered by your insurance.
For this reason, do not be in a hurry to start the drying process. You may be told that it is imperative to start drying immediately to prevent mold growth. Remember, it takes a minimum of 72 hours for mold to start growing (in a perfect environment).
Be wary of a restoration/mitigation company that shows up unsolicited at your house following damage. We strongly recommend that you check with your insurance company first for recommendations and confirmation of coverage.
When hiring a restoration/mitigation company confirm their California State License Board (CSLB) number and also ask for their Institute of Inspection, Cleaning, and Restoration Certification (IICRC) number, as some insurance companies will not pay for services provided by someone who is not IICRC certified.
Processes –
This is a generic outline of the process; not all claims will go exactly this way.
Once you contact your insurance company and explain the nature of the claim, they will assign you a claim number and assign you to a claims adjuster. Within a few days, they will send a field adjustor to your house to assess the damage.
The field adjustor will make an assessment and will submit an estimate to your claims adjustor. At this point, they will issue you a check for the estimated damages. In our experience, this check will not be adequate to cover the repairs.
It is strongly recommended that you hire a licensed contractor early in the process. Preferably, before the field adjustor comes out, if possible, so the contractor can independently assess the damage and walk the job with the field adjustor.
If you can’t retain a contractor before the field adjustor tour, accept the check from the insurance company and put it aside until you find a contractor.
Once you hire a contractor and they have assessed the damage to your home, they will prepare an independent estimate and submit it to your insurance company. Once they are reconciled with the insurance, a supplemental check will usually be issued.
If additional damage is discovered during the repairs, most insurance companies will approve supplemental claims by the contractor if adequate justification is submitted.
It’s all too common for people who aren’t familiar with the process to receive the initial check, and they assume that is the total amount of the money allocated. Then they start asking contractors for quotes so they can find one that will complete the work for the insurance money they were allotted.
As a contractor, when a customer calls us for a quote in this scenario, we explain the process to them and advise them that we will not provide their insurance with a quote unless the customer enters a contract with us. Assessing the damage, preparing a quote, and interacting with the insurance company is labor-intensive, and most contractors aren’t going to engage unless they are under contract.
In another scenario, we get calls from potential customers telling us they are in the process of gathering three quotes for the work. When I ask why they need 3 quotes, they usually respond that the insurance gave them an amount of money and they are trying to get the work done for that amount of money, or less. We explain the process to the customer as a courtesy and advise them to exercise caution in who they hire.
Occasionally, the customer is told by their insurance company to obtain a quote from a contractor to facilitate the claim. This generally means the insurance company doesn’t have a field adjuster in the area and will be hiring an independent adjuster to assess the damage.
Once you have a contractor, all email communication with the contractor and insurance should include you as the customer, so there is no confusion about the quotes being submitted or follow-up communication.
Insurance companies, along with mortgage companies, are becoming more cautious to ensure the customers hire a licensed contractor and that the repairs are completed correctly. In a recent repair we completed, the insurance company sent a single large check to the customer’s mortgage company that required signature by the mortgage company, the solar company that had a second on the home, and by the insured parties. It took about 8 weeks for the check to make it through the process. During that time, we completed about half of the work on the repairs. The mortgage company then issued one-third of the total check for the work that had been completed to date. An additional one-third of the payment could not be received until the repairs were at 50% complete. The final third could not be received until all repairs were completed. Ensure the contractor you hire is aware of the potential restrictions and processes for collecting payments for repairs and is willing to work within those boundaries.
Your insurance company will not recommend a particular contractor unless they are part of a preferred provider program. It is strongly recommended that you hire a contractor who routinely performs insurance work and is familiar with the process. Your contractor should be using the Xactimate program to submit estimates to the insurance company, as that is the software used by the insurance company.
Discuss your contract with your contractor. Our company uses a phrase that we will complete the repairs with the funds allocated by the insurance company, with no out-of-pocket expense to the homeowner, other than their deductible.
Discuss the payment process. Under California law, the contractor cannot collect funds for work not yet performed. For example, if the insurance claim allows 3,000 for demo and 700 for a dumpster, the dumpster payment should not be collected until the dumpster is delivered, and the demo money should not be collected until the demo is in the dumpster, and so on. Your contractor should receive a series of payments as the work is completed. This is similar to the process described above, wherein the mortgage company may set progress payment marks.
Water, Mold, Fire restoration and mitigation
Very few contractors are certified in mitigation/restoration for these repairs. Generally, you will hire a restoration company to handle the mitigation/restoration process, then hire a contractor to complete the repairs post restoration.
Generally speaking, it will take 5 to 15 days for the remediation and restoration process, during which you will likely be placed in alternate housing. Once the restoration remediation process is completed, your contractor can begin repairs. The mitigation/restoration company may offer to assist you in hiring a contractor with whom they are associated. Remember, you are entitled to hire the contractor of your choice.
Depending on the severity of your damage and how quickly the insurance can complete the initial payment, it may take several weeks to initiate repairs and several more weeks to complete them.
If your damage requires an engineer and plans to obtain a permit for the repairs, this will take additional weeks. Ensure your contractor has an engineer they can work with and can access quickly.
I hope you have found this information useful. If you have any questions or would like additional information, please contact us at :
office@greatbuilderconstruction.com
661-300-6226
Jim Lundy
Director
Great Builder Construction lic 1090222
IICRC # 70223941