| INSURANCE CLAIM |
Disclaimer The information, forms, and techniques herein represent the author's opinions only and is not legal advice. Any and all advise given herein is not legal advise. The information and forms provide general educational information only. If legal or other expert advice is required by the reader, the services of a competent attorney, accountant, insurance agent, or other professional should be sought. The information, forms, etc. come without warranty of any kind, either express or implied, including but not limited to implied warrantes for quality, performance, merchantability, or fitness for any purpose. The author shall not be liable to the user or any other person or entity with respect to any liability, loss, or damage caused or alleged to be caused directly or indirectly by this information, forms, etc.
Copyright © 1992 Michael L. Smith, Revised 1998, 2000 All rights reserved. No part of this publication (except forms) may be reproduced or transmitted in any form or by any means, electronic or mechanical, without permission in writing from the author. The forms may be printed out for private, one time, use only. Any and all commercial use of this site, without prior agreement, is strictly prohibited. All copyright infringements may result in severe penalties.
At your earliest opportunity notify your agent of the loss. If the loss appears to
be small or you are not sure whether the damages are covered, call anyway. In smaller
claims, usually $2,000 or less, the insurance agent may be authorized to settle the claim.
Anything over that amount will always be handled by an insurance adjuster.
It is important to note that the agent's primary business is in the sales and
service of your insurance policy. They are experts in describing the type of coverage's
which best suit your needs.
However, your agent can be very helpful in acting as a liaison between you and the
insurance company as well. They will need to know the date of the loss, type of loss, and
the extent of damages. Your agent will then notify the insurance company of the claim and
provide them with the necessary information.
While you have the agent on the phone, verify and confirm your records: name and
address of the insurance carrier, telephone number, fax number, policy number, and the
manager's name in the adjusting department.
It may be necessary to have someone do immediate repairs such
as water removal or an emergency board-up of the structure. If so, speed, efficiency, and
proper care is essential in limiting any further loss.
If necessary your agent can provide you with a list of
emergency repair companies. This is helpful if you need immediate repairs and you cannot
locate a company. Emergency repair firms can be found in the yellow pages of your
telephone directory. Many contractors are quick to respond to emergency calls of this
nature as the chance of winning a larger restoration contract is a strong motivating
factor.
Usually emergency work can be billed directly to the insurance
company. If the restoration firm is reluctant to charge your insurance company directly
save the bill for the insurance adjuster. He can have a check drawn up for this
immediately. Have the service company fill out and sign your Emergency Work form and get a
copy of the billing before they leave.
Keep your insurance-related expenses separate from your own
personal expenses. If the loss is over $1,000 open a separate checking account for all
your transactions.
The HO's provide coverage within five main areas; structure, personal property, loss of use, liability, and incidental coverages. You may also have one or two endorsements attached to your policy as well. The declarations
page (front page) of your insurance document indicates the amount
of coverage.
One of the first thoughts that come to mind after suffering a
loss is Am I Covered? A quick review of your policy will help identify the types of
coverage and the amounts insured for. Your agent can assist in answering any questions you
might have regarding the extent of your coverage or what is necessary when filing your
claim.
There are seven different types of homeowner policies in use
today. They are all referred to as HO for homeowner. The most common is the HO-3 (Special
Form).
HO-1 = Basic Coverage
HO-2 = Broad Form
HO-3 = Special Form
HO-4 = Renter's Form
HO-5 = Comprehensive Form
HO-6 = Condominium Form
HO-7 = None
HO-8 = Older Home
If you are unsure which form you currently have contact your
agent for details. They can also direct you to each provision which relates to your
particular loss.
The most obvious coverage is of course on your home. The type
of home you live in, whether it is a detached house, apartment or condominium, will
determine which homeowner's policy you require.
The most common structure is the single family house. It is
the self contained individual unit. Also included as part of the home are any appurtenant
structures such as garages, tool sheds, workshops, gazebos, children's playhouses and any
other structures used as part of the household. It is important to keep in mind that these
structures are insured under the condition that they are for household use and not
business use.
Homeowner's insurance on a condominium is quite different from
the insurance on single detached dwellings. In most cases the partition walls belong to
the condominium association and will be covered under their insurance. The interior walls
belong to the condo owner and are covered under the condo-owner's insurance.
There are many gray areas in defining exactly what condo
insurance covers and the extent of the condominium association's liability. Because of
this it is best to insure your condo with the same insurer that the condominium
association uses. This eliminates problems such as gaps in coverage, overlapping coverage,
and feuding insurers trying to force the other to pay. Best of all, you deal with only one
adjuster from only one company.
Coverage not in the condo association's policy should be
covered under your own homeowners policy. The condominium association's insurance usually
covers cabinets, paneling, built-in appliances and any other permanently attached
appurtenances. If it does not be sure it is included in your policy.
The structure of a mobile home is treated in much the same way
as a single family home, except that many mobile home policies have several additional
features. One such feature is that the structure includes manufacturer's parts, equipment
and any accessories that are a part of the unit. Also, the mobile home must be tied down
or anchored firmly in place as a condition to coverage. The homeowner's insurance does not
cover a mobile home while it is in transit. Unlike all other HO policies the
Mobile Home policy may include coverage for flood damage.
Since a renter does not own the structure of the apartment the
coverage is limited to personal property and liability only. However, if a renter makes
minor renovations to the property and uses his own money in doing so, it is likely that
the renovations would be covered as an improvement to the property and the renter would be
reimbursed for any damage done to those improvements.
The structure of the older home is insured a little
differently from a recently built home. Because of the materials used and the
architectural style most older buildings are significantly more expensive to restore to
their original condition. For this reason insurance policies only cover costs to restore
the home to serviceability and not original condition.
Personal property is usually insured to 50% of the dollar
amount of coverage on the home. It includes all your personal property which is usual and
incidental to the occupancy of your home. Furniture, appliances. clothes. radios, TVs,
books, etc. are all covered under your personal property coverage.
There are some items such as built-in appliances that may be
considered to be either structure or personal property. The general view is that if it is
permanently attached to the structure it falls under the structural category and if it can
be moved without affecting the structure it is considered to be personal property.
Personal property that you take away from the home is also insured. However, the limitations and exclusions are somewhat different than for property in your home.
If any part of the home becomes uninhabitable due to an insured loss additional expenses you incur are covered. Compensation includes hotel rooms, rent, food, telephone bills and other expenses you would not have incurred but for the loss. Or you may elect to be compensated according to the rental value of the uninhabitable property.
Liability coverage covers the cost of medical payments and
property damage to others whom you owe a legal duty of care. It also covers legal expenses
in defending a lawsuit against you.
This part of the policy is a maze of legalese with many exceptions, exclusions, and limitations. If you are unsure whether the insurance company will cover your liability claim, get legal advice before submitting a claim. There are just too many escape clauses, written in abstruse phraseology to risk a denial of your claim.
Other coverage's within the policy include:
Fire Department Service Charges
Debris Removal
Property removal to protect from peril
Board-ups and temporary repairs
Trees, shrubs and other outdoor plants
Endorsements, also known as riders or floaters, provide supplemental protection. Depending on your insurance needs endorsements can be well worth the added expense. Most insurers have dozens of endorsements to fit almost every imaginable need. Below are some of the more common endorsements, replacement cost, personal articles, theft coverage extension, ordinance coverage, incidental business option, fine art collection, pet insurance .
A replacement cost endorsement significantly increases the
extent of your coverage on personal property. You are covered for whatever the costs are
to replace your damaged property with similar property that is new.
For example, suppose you lost a three year old coat which
would cost $300 to replace. Without the replacement cost endorsement you would receive a
little more than $125 as settlement, the actual cash value.
With replacement cost you are entitled to receive a new coat
of like, kind and quality. At the adjusters discretion, reimbursement may be made by; 1)
providing you with the actual cash value price immediately and after you purchase a new
coat the balance, or 2) the adjuster purchases a new coat for you.
There is a limit of course on how much the insurance company
will pay for replacing new items. The limit is normally 400 percent of the cost of your
damaged property when it was new.
Usually a replacement cost endorsement increases the limit of
contents coverage in your policy. Taken as a percentage of the structural coverage, the
amount of contents coverage will increase from 50% to 70%. If the structure of your home
is insured for $200,000.00 your contents would then increase from $100,000 to $140,000.00.
This endorsement covers your personal property against loss,
theft or mysterious disappearance wherever the personal property may be, on or off your
property. You must have the personal property itemized and supported with proof of value.
Most homeowner policies do not cover stolen property from your
vehicle if there is no proof of forced entry. With the theft coverage extension you are
protected against theft from your unlocked and unattended vehicle.
This type of coverage insures against extra costs incurred
because of changes in building codes. For example, if your house was damaged by fire and
in the process of restoration it was discovered that replacing the electrical wiring to
its original condition would be against municipal building codes, the ordinance protection
coverage would cover the additional costs to upgrade to current standards. This coverage
can be very valuable if you are insuring an older home.
If you conduct any full- or part-time activity for profit in
your home it is considered a business and consequently is not covered by the homeowner's
policy. There are endorsements available that will extend your homeowner's coverage to
include losses related to your home business. These endorsements usually cover, to a
certain degree: business-related injuries, business furniture, office equipment and
machinery.
Any valuable collection you have may be insured. However, the
collection must be appraised and a value determined for each item. Called a valued policy
the value of the collection is agreed upon before being insured so that after a loss
occurs there is no dispute about the recovery amount. The insurer reimburses for the
appraised value.
Your homeowner's policy covers invited guests against injuries inflicted by your pet. However, it does not cover your pet against injuries or disease. For this contingency a few insurers do provide endorsements to their coverage for veterinary costs should your pet be sick or injured.
The amount of coverage you have depends on which HO policy you purchased. HO-3 is the most common policy and the one referred to here. There are several areas of your policy that explain what is covered, what is not covered, and for how much. To best understand it consider the, Deductible Clause, 80% rule, coinsurance, actual cash value, limitations, exclusions, other insurance clause, and mortgage clause.
All homeowners policies have what is called a deductible
clause. This clause states how much money the insurance company will withhold from your
final settlement price. The deductible ranges from $200 to $1,000. The higher the
deductible the lower your insurance premium.
Throughout the insurance industry there is one unique rule
that all companies follow. That is the 80% rule. Simply, this rule provides that if you
are insured for 80% of the value of your home, the insurance company will cover 100% of
the repairs of any size loss up to the maximum amount of coverage stated in your policy.
For example, the value of your home is $200,000 and you have
80% coverage which is $160,000. Because your home is insured for less than 100%, it would
be considered to be underinsured. However, the 80% rule provides 100% coverage of any size
loss to the limit of coverage. So if half the house was damaged and it cost $100,000 to
rebuild you would be covered for that amount. If the house was completely destroyed and
cost $200,000 to replace you would not receive more than the $160,000. The advantage here
is that the insured is 100% covered for any loss up to $160,000 and the cost of the
insurance policy is much less.
Coinsurance is referred to in many different ways. Among them
are average clause, reduced rate contribution clause, contribution clause, reduced rate
average clause, or reduced rate coinsurance. If you have less than 80% coverage you
automatically become a Coinsurer. That is, you are responsible for part of the costs. How
much depends on the percentage of coverage you have at the time of loss divided by 80%
(from the 80% percent rule).
A claimant whose house is valued at $200,000 and insured for
$100,000 would receive a little more than half the repair costs.
This is calculated by taking the $100,000 in coverage and dividing the 80% minimum required which is $160,000. The result is .625 or 5/8ths. This is the percentage of the restoration costs the insurer will pay. The claimant is responsible for the remainder. If, for example, the repair costs are $20,000 the insurer would pay 5/8ths or $12,500 and the claimant would be responsible for the remaining $7,500. See the table below.
Coinsurance Table
| Replacement Value of Home | Amount of Insurance Coverage | Percentage of Coverage | Coinsurance Percentage | Payment For Total Loss | Payment For $100,000 Loss | Payment For $20,000 Loss |
| $200,000 | $200,000 | 100% | 100% | $200,000 | $100,000 | $20,000 |
| $200,000 | $160,000 | 100% * | 100% | $160,000 | $100,000 | $20,000 |
| $200,000 | $120,000 | 60% | 60/80 or 75% | $120,000 | $75,000 | $15,000 |
| $200,000 | $100,000 | 50% | 50/80 or 62.5% | $100,000 | $62,500 | $12,500 |
* see 80% Rule above
Providing you have 80% coverage or more, the structure of your
house will be insured for full replacement costs on any size loss. However, as indicated
in the policy, the insurer has the option to pay only the Actual Cash Value initially.
This amount is roughly the replacement cost less depreciation. Once all the damages have
been repaired or replaced the insurer is obligated to pay the balance.
It is the insurers duty to pay the actual cash value in a
timely manner so repairs can begin. And interest on the replacement cost amount begins
from the date of the loss.
Unless you have a Replacement Cost rider attached to your
homeowner's policy you will receive the Actual Cash Value for destroyed contents. Actual
cash value is determined by taking the current value of the item and depreciating for age,
usage and condition.
For example, the actual cash value of a stove lost in a
kitchen fire would be derived by taking the present-day price of a similar stove and
deducting for the age of your stove, how often it was used and whether it was fully
operational at the time of loss. Obviously this type of appraisal can be very arbitrary.
However, there are general guidelines that can be used when determining the actual cash
value. See the Depreciation Guide located in front of the Personal Property Summary forms.
Every insurance policy has stated limits of coverage. The
limits are a maximum dollar amount the insurance company agrees to pay on a particular
loss. Below is an example of the limits in a homeowners policy.
Based on the value of your home and the percentage of coverage
you desire.
Usually 10% of the coverage of the house.
Usually 1/2 the amount you have covered in the structure. For
example, if the structure is covered for $100.000 your personal property would be insured
for $50,000. If you have Replacement Cost insurance on your personal property the limit is
increased to 70%.
currency and bullion $200
securities $1,000
business equipment $200
boats and their appurtenance $1,000
moving trailers $1,000
computers $4,000
theft of coin collections $200
manuscripts/stamp collections$1,000
silverware and goldware $5,000
jewelry, watches furs $2,000
Loss Of Use: Limited to the time it takes to repair the
dwelling or 12 months whichever is less.
Liability:
Legal liability:$100,000 to $1,000,000
Medical payments: $500 to$1,000
Damage to property of others: $500
The exclusions state what is not covered in the policy;
the types of property
not covered, the types of losses not covered
and any conditions that bar coverage. Below
are some of the more common exclusions to watch out for.
Automobiles; large boats; aircraft; snowmobiles; and their appurtenances
Business property
Personal records, files or software
Pets
Rental property (structure and contents)
Your roomers', boarders' and tenants' personal property
Outdoor attachments: TV and radio antennas, satellite dishes
Due to seepage in plumbing (must be sudden and accidental)
Due to settling, shifting, bulging or cracking
Legal liability relating to business and professional activities, hobbies involving the sale of products, or day care for profit
Your contents while in the hands of professional movers or storage companies
Injuries to others when using your recreation vehicles away from your property
Injuries to yourself while on your property
Personal property stolen from unlocked automobiles
Personal property stolen from a part of your dwelling rented to others
Personal property lost from a temporary residence if you are not occupying the residence at the time of loss
Subsequent damages caused after a loss which could have been
prevented by securing the property
Floods, Tidal Waves, Mudslides
Subsurface ground water
Subsidence
Earthquakes
Freezing (if the home was unoccupied for a prescribed amount of time and there was no one to make a daily check of the premises)
Termites, birds, rodents or other vermin
Communicable diseases
War, Insurrection, Invasion
Nuclear explosion,
Radiation release from a nuclear facility
Industrial pollution,
Smoke from agricultural smudging
Electrical/water interruption from utility company
Personal property that has been lawfully confiscated
Illegally acquired property
Intentional or criminal acts by the insured relating to the loss
Concealment or fraud
Governmental by-laws: zoning, building codes etc.
Injuries sustained by household employees if state law
requires workman's compensation
Construction materials taken from your unoccupied home
Personal property taken from your unoccupied home
Vacant dwellings past thirty days
Mysterious disappearance; vanishing personal property that cannot be explained
Injuries to others sustained by dangerous pets, in some
policies this includes German Shepherds, Dobermans and Pit Bulls.
Insurance policies always have an other insurance clause which
limits each insurers liability according to how many insurers a homeowner has. For
example, if you had taken out two or more policies covering the same type of loss each
insurer would pay his portion of the total claim. If you had a $50,000 claim and had two
insurers covering the same amount each insurance company would pay 50% percent or $25,000.
Having double coverage does not double the settlement amount,
but divides the costs among the insurers. This type of overlapping coverage is simply a
waste of money spent on premiums.
Since a mortgage company (mortgagee) has a vested interest in
your home it also has an interest in your insurance settlement. In order to protect the
mortgage company's interest a mortgage clause is included in the policy.
On structural property claims the mortgagee may be named on
insurance drafts relating to the property. Although the mortgage company does not
participate in restoration it may decide to hold funds until it is satisfied with the
progress of restoration.
Incidentally, some mortgage contracts have a clause which provides for liquidation of the mortgage in the event of a total loss. If your house is totally destroyed, the mortgagee may decide to liquidate the mortgage contract and keep its share of the insurance settlement leaving you with the balance but without a home.
Following is a list of several factors insurance companies use to determine the price of your premium. These factors significantly affect the amount you pay for your premium. The more secure the home the less risk the insurers are taking and consequently the less you should have to pay in premiums. These factors include; The property, Policy coverage Shopping for the best policy, Updating Your Coverage, Flood Insurance, Keeping Current With Video Tape
- regional home values, local building codes, local material and labor costs
- proximity to fire hydrants, availability of fire departments
- high risk or high crime area as determined by the Federal
Emergency Management Agency or the Federal Crime Insurance Agency
Wood, Concrete, Brick or other materials
Single story, Split level, one-and-a-half story, two-story,
and square footage.
Homes that are 30 years old or older are subject to closer
scrutiny. Factors considered are the type of wiring (whether there is a fuse box or
circuit-breaker box), type and condition of plumbing, and the type and age of the heating
and air conditioning system.
Recent repairs such as new roofing, plumbing, electrical
wiring, heating or air conditioning.
- fire extinguishers in the home, fire alarms in the home
- fire alarms connected to fire stations
- locks, dead bolts, security bars, burglar alarms and other anti-theft devices
- nonsmokers
The percentage of coverage directly affects the amount of the
premium. If you are covered for 80% instead of 100% of the value of the home it further
reduces the premium.
Some insurance companies will discount your homeowner's
premium if you also buy their auto insurance.
Any claims within the past three years will affect the price
of the premium.
The size of the deductible directly affects the price of the
premium. The difference in the price of the policy can be as much as 25% depending on the
deductible. Always check to see what the premium price is with deductibles of $250, $500,
and $1,000.
Before renewing your policy spend a couple hours reviewing
your insurance needs. It will save you from complications with a claim and will likely be
less expensive since you know exactly what you want, which insurer has it for the best
price, and most importantly in these times, how solvent the insurer is.
Get quotes from several insurance agents before purchasing a
policy. Provide each agent with the same information that may reduce the premium such as
safety features, size of the deductible and coverage for 80% instead of full coverage.
Check the insurer's financial status and satisfaction ratings
as described in the following publications: Best's Review: Property, Casualty Insurance
Ed. or Best's Key Rating Guide. These magazines are aimed toward the insurance agent and
adjuster but have very useful information for the insured as well. You can find them in
your public library or contact:
A. M. Best Company, Inc.
Ambest Road
Oldwick, NJ 08858-9988
201/439-2200
When you purchase insurance you will be given a binder from
the agent. This provides coverage while the policy is being created by the insurance
company. If you are dealing with an independent agent find out what company your are being
insured under, when it is effective, and exactly what is being insured. Always use checks
or other form of payment that will verify the transaction. Always get a receipt that
specifies what is being purchased. This will be the only proof that you are covered until
you receive the policy.
Modify your coverage according to any changes in the value of
your home. The best way to avoid being underinsured is by keeping current with the
appreciation value of your home and having an inflation protection clause in your policy.
Also, if the value of the property goes down due to a real estate market slump adjust your
homeowner's insurance accordingly. Remember, being overinsured does not add anything but
higher costs to your premium.
If you own a condominium and are insured with the same company
as the condominium association check to see if they have changed insurance companies or
modified their policy before you renew yours.
And don't forget to remove your mortgage company's name from the policy as soon as the mortgage has been paid off.
In areas where the incidence of insurance claims is likely to
be high insurers are very reluctant to sell coverage. If they do provide coverage the
rates will be exorbitant. Because of this the federal government has stepped in to act as
an insurer. It provides insurance in designated flood areas. For more information go to:
Federal Emergency Management Agency F.E.M.A.
www.fema.gov
Federal Insurance Administration
500 C St. SW
Washington, DC 20472
www.fema.gov/nfip
800/427-4661
Remember, in the event of an insurance loss you will need some
way of establishing what was damaged and destroyed. Depending on the type of loss, this
can be almost impossible at times. And to list all your possessions on paper is just too
time consuming and monotonous, especially if the inventory is to stay current and
thorough.
The best way of avoiding that headache is by using a camcorder
for all your inventory. By going from room to room recording all your personal possessions
on film you have the most accurate reference in the shortest amount of time. Any items
that have serial numbers or model numbers can be filmed and orally recorded onto the tape.
In the unfortunate event of a loss you can easily review the
tape and identify exactly what was lost. And if the adjuster has trouble verifying the
items, no problem, everything is on tape.
Doing this once a year is your only real assurance of protecting everything in the home. Keep the tape and your policy in a safe place, preferably in a fire proof safe or somewhere outside the home.
Disclaimer The information, forms, and techniques herein represent the author's opinions only and is not legal advice. Any and all advise given herein is not legal advise. The information and forms provide general educational information only. If legal or other expert advice is required by the reader, the services of a competent attorney, accountant, insurance agent, or other professional should be sought. The information, forms, etc. come without warranty of any kind, either express or implied, including but not limited to implied warrantes for quality, performance, merchantability, or fitness for any purpose. The author shall not be liable to the user or any other person or entity with respect to any liability, loss, or damage caused or alleged to be caused directly or indirectly by this information, forms, etc.
Copyright © 1992 Michael L. Smith, Revised 1998, 2000 All rights reserved. No part of this publication (except forms) may be reproduced or transmitted in any form or by any means, electronic or mechanical, without permission in writing from the author. The forms may be printed out for private, one time, use only. Any and all commercial use of this site, without prior agreement, is strictly prohibited. All copyright infringements may result in severe penalties.
