How Increasing Wildfires and Climate Change Are Affecting Home Insurance Claims & Coverage

In fact, some homeowners struggle to find home insurance because of wildfire risk. Fewer home insurance companies are willing to insure high-value homes in wildfire-prone areas, for example.

The December 2021 fire in Broomfield, Colorado burned 600 homes. The fire forced the complete evacuation of the towns of Superior and Louisville.

Meanwhile, wildfires that used to only occur during the hot and dry summer months are now occurring at all times of year. The governor of Texas declared a state of disaster in March 2022 because of wildfires in North Texas, for example and wildfires occur in California every month of the year.

As the risk of wildfires increases due to climate change, homeowners – and home insurance companies – are struggling to maintain good insurance.

Insurers Are Cancelling Policies in Wildfire-Prone Areas

You buy home insurance to protect you from unexpected events. Unfortunately, your insurance company could cancel your policy at any time due to excessive risk.

• As reported by Pew, one homeowner in Colorado got an unpleasant surprise from his insurance company. After moving to Boulder, Colorado and purchasing a home, that homeowner received a cancellation notice from his insurer.
• An assessor from his insurance company, Allstate, had visited the homeowner’s property and determined it was too likely to be destroyed by a wildfire. Because of the high risk, Allstate cancelled the policy.
• The homeowner was surprised and unsure what to do next. However, the homeowner also had a mortgage, and the lack of insurance left that financing in jeopardy. Lenders require home insurance to protect the collateral of the loan. If you can’t find an insurance company to cover your home, the lender could seize your home.

California Has a Last-Resort Lender for Homeowners with Cancelled Policies

California experiences more destructive wildfires than any other state. In 2018, catastrophic fires caused more than $9 billion in losses, according to the California Department of Insurance.

When the Camp Fire burnt through the down of Paradise, destroying 14,000 homes, it drove a local insurance company into bankruptcy.

California’s wildfire risk is so high that mainstream insurers refuse to insure certain properties.

In response, California has established a lender of last resort called the California Fair Access to Insurance Requirements Plan. If you can’t get insurance from the ordinary market, then you can use the California Fair Access to Insurance Requirements Plan to get the coverage you need.

It’s not just California: wildfires also threaten millions of homes in Texas and Colorado. As insurers become increasingly wary of wildfires, it’s becoming harder for homeowners to find insurance.

Why Insurers Deny Coverage for Wildfire Risk

Wildfires are a risk in most parts of the western United States. But why do insurers deny coverage for certain homes but not others? How can some homes in a neighborhood get good home insurance while others need to pay higher premiums?

Insurers consider factors like:

1. Properties surrounded by forest, which significantly increases the risk of a wildfire
2. Properties only reachable on backroads or forest service roads, which increases the
3. risk of damage and injuries and reduces the ability to fight an active fire
4. Slopes where the wildfire is likely to run
5. Vegetation in the area, including overgrown brush and trees
6. Wind patterns

After you buy home insurance in a wildfire-prone area, an assessor may visit your property to check these factors. The more factors there are to increase the risk of a wildfire, the more likely the insurer will cancel your policy.

Some Towns Are Becoming “No-Go” Zones for Insurers

As wildfire risk increases, it’s becoming increasingly difficult to buy homeowners insurance in certain communities.

In the town of Pagosa Springs, Colorado, for example, approximately 15% of homes cannot obtain insurance due to wildfire risk.

15% of properties in Pagosa Springs, Colorado land in State Farm’s third wildfire risk category. At this category, State Farm will not provide insurance to the property.

No matter how many trees the homeowners cut down, and no matter what steps the homeowner takes, the homeowner cannot obtain insurance in that location.

Meanwhile, hundreds more homes in Pagosa Springs are in State Farm’s second category, which means they’re considered high risk. Homeowners can buy insurance in this category, but it’s more expensive.

State Farm is America’s largest property and casualty insurance company. They insure more homes across the United States than any other insurer.

Wildfire Mitigation Reduces Risk – And It May Be Required

Wildfire mitigation is a familiar process for those in high-risk wildfire zones. Today, many homeowners clear brush from their property annually to reduce the risk of a fast-spreading wildfire.

In fact, some homeowners are required to do fire mitigation work on their property.

Some insurers require homeowners to clear brush from their property as part of regular home maintenance, for example. If you fail to do this, then your insurer could deny your claim due to lack of maintenance.

Meanwhile, certain residents of Boulder, Colorado must perform wildfire mitigation due to city bylaws. Since 1993, Boulder County has required all homebuilders on the western side of the county to do wildfire mitigation work. In 2010, after a devastating local fire, county land use officials recommended increasing mitigation efforts.

Today, Boulder and other counties employ a team of agencies and wildfire experts dedicated to managing wildfire risk as much as possible. These groups work with insurance companies, advocating on behalf of homeowners to ensure they can get covered.

3 Tips for Managing Wildfire Risk and Home Insurance

Many homeowners don’t consider home insurance until it’s too late. If it’s already wildfire season, or if a fire is approaching your home, then it’s too late to adjust coverage.

To manage your wildfire risk and home insurance, consider the following:

Understand your Insurance Policy and Coverage

A standard home insurance policy covers wildfire damage and all other fire damage.

However, your home may be dangerously underinsured. As home values rise, and as the cost of building increases, a growing number of homeowners are underinsured.
In fact, nearly 22% of homeowners are underinsured, according to Nationwide, with some homeowners underinsured by 60% or more.

It’s more important than ever to understand your policy and coverage. Check your policy to ensure it reflects the value of your home – especially if you have recently completed renovations or improvements.

Similarly, understand the difference between a replacement cost and actual cash value policy:

• Replacement cost policies cost more, but pay for the cost of replacing your home and your possessions after a wildfire
• Actual cash value policies are cheaper, but you receive compensation based on the value of your property minus depreciation, which could mean hundreds of thousands of dollars’ in less compensation after a loss

Keep Go Bags for Evacuation

Many people who live in a fire-prone area already keep an emergency go bag during the high risk season.

However, as the risk of wildfires increases year-round, and as wildfires impact more communities, it’s important to keep a go bag nearby at all times of year.

When wildfires occur, you may have only minutes to escape your property. Your go bag should have anything you cannot replace.

Ask your Insurer About Wildfire Mitigation Discounts

Some insurers offer wildfire mitigation discounts. Others require wildfire mitigation as part of good home maintenance.

Some wildfire mitigation tips include:

• Clear brushes and vegetation within a 100 to 200 foot radius of your home
• Protect your roof and home from embers (say, by watering your roof when a wildfire approaches)
• Build your home using fire-resistant materials
• Create a fire-resistant perimeter around your home

Remember: radiant heat from a wildfire can ignite a house up to 100 feet away. Even if the forest is 100 feet away from your home, you could be at risk of a serious wildfire.

Final Word

It takes just one small spark to ignite the next record-breaking wildfire. That small spark could occur in your backyard.

As the risk of wildfires increases, it’s becoming harder and more expensive for homeowners to find the insurance they need.

If an insurance company is disputing your wildfire insurance claim, or if you’re unsatisfied with your settlement offer, then request a free consultation from an expert ClaimsMate public adjuster today.

Read More Here: How Increasing Wildfires and Climate Change Are Affecting Home Insurance Claims & Coverage

How Home Insurance Covers Natural Disasters

After a disaster, many homeowners are surprised when their insurer denies or reduces a claim. Keep reading to discover everything you need to know about how home insurance covers natural disasters – and how to protect your home against natural disasters.

Basic Home Insurance Covers Most Natural Disasters

Most home insurance policies cover natural disasters like:

• Tornadoes
• Hurricanes
• Fires
• Lightning
• Explosions
• Volcanoes

If you live in a disaster-prone area of the country, then your home insurance policy should protect against most common perils in the region.

Most Policies Do Not Cover Floods or Earthquakes

Basic home insurance covers the perils listed above, but it does not protect against floods and earthquakes.

In fact, no normal insurance policy includes flood coverage by default. Instead, property owners need to buy flood insurance through FEMA, or a FEMA-partnered insurer, to protect homes and businesses against flood damage.

Flood insurance is particularly important when living in low-lying areas, like Florida, North and South Carolina, and parts of the Gulf Coast. However, flood insurance can be important in any coastal area or for anyone living along a flood-prone river.

Most homeowners insurance policies also do not include earthquake damage. If you live in an earthquake-prone area – like many parts of California – then you may want to buy added earthquake insurance.

Tornado Damage

Tornadoes can occur in all 50 states. Each year, approximately 1,200 tornadoes hit the United States.

Fortunately, a standard homeowners insurance policy covers tornado damage.

Home insurance includes coverage for wind, rain, and debris damage up to the limits of your policy. As long as you have sufficient coverage based on the value of your home and your possessions, your insurer should compensate you for any damage after a tornado.

However, standard insurance policies will not cover flood damage linked to the tornado. If the tornado destroys a water reservoir outside of your home, for example, and rising floodwaters destroy your basement, then insurance will typically not cover this damage – unless you have flood insurance.

Hurricanes

Insurers cover hurricanes like they cover tornadoes. Your wind, rain, and debris coverage will protect you against most hurricane damage.

Your insurance should cover your home and your possessions up to the limits of your policy. It should also cover additional living expenses, including costs you incurred as a result of the hurricane (say, if you need to leave your home and stay in a hotel for a few days).

However, hurricane coverage doesn’t cover water damage from flooding. As hurricanes become more common, it may be important to add flood coverage to your policy.

Your insurer could also deny claims if you update your policy too late. You cannot update your policy with added coverage or flood insurance after the storm has been named, for example.

Fire

All standard homeowners insurance policies cover fires, including fires started by natural disasters and accidental fires in your area.

However, your home insurance policy will not cover damage from intentional fires or fires caused by gross negligence. If you started a bonfire on your deck, for example, or asked a friend to burn down your property, then you are likely to have a fire damage insurance claim denied.

A standard homeowners insurance policy covers your dwelling, personal property, liability, and additional living expenses up to the limits of your policy.

According to the National Fire Protection Association, firefighters responded to 1.4 million fires in the United States in 2020. These fires caused $21.9 billion in property damage, and 26% of fires occurred in residential homes. All good home insurance policies need adequate fire coverage.

Lightning

Lightning can cause severe damage if it strikes on or around your property. Fortunately, a standard homeowners insurance policy covers lightning strikes and the resulting damage.

Lightning can damage your home with a direct strike, where lightning strikes or enters your home and causes damage.

Lightning can also damage your home with a near miss. The lightning strike missed your home but still caused damage. In this situation, the insurer may investigate to verify that lightning caused the damage (not a blown transformer).

Lightning can also cause a ground surge, which is a spike of electricity caused by lightning. Proving this damage to your insurer can be difficult, but insurance should cover damage caused by a ground surge.

Extreme Cold

Home insurance covers damage that occurs to your property because of extreme cold. However, you have a responsibility to maintain your home at a comfortable temperature to prevent frozen or burst pipes.

Extreme cold can lead to frozen pipes that burst and cause significant water damage. Home insurance should cover burst pipe insurance claims. However, if your insurer determines a lack of maintenance caused the burst pipe to freeze, then they could deny your claim.

Extreme cold can also lead to:

• Snow and ice accumulation on your roof and gutters, which should be covered by homeowners insurance
• Falls on frozen driveways, including any lawsuits and medical bills resulting from a fall

As long as you’ve performed all due maintenance on your home, home insurance should cover you for extreme cold damage.

Explosions

Explosions aren’t as common as other disasters on our list, but they still occur every year.

Explosions can occur because of a gas leak or an incident at a nearby home or business.

Home insurance should cover the cost of repairing your property and possessions after an explosion. As long as you did not intentionally set the explosion, insurance should cover you.

Volcanoes

Most Americans go to sleep every night without worrying about volcanoes. However, there are 161 potentially active volcanoes in the United States.

If you live in Hawaii, Alaska, and parts of the West Coast, then an active volcano could cause significant damage to your home.

When Mount St. Helens erupted in 1980, it caused around $860 million in damages, making it the most destructive volcano in United States history.

Fortunately, insurance should cover damage from volcanoes.

However, residents of Hawaii (particularly the Big Island) may have different coverage options depending on their lava-flow hazard zone.

Insurance policies may also exclude some damage resulting from a volcano, including mudslides and earthquakes.

Natural Disasters Not Covered by Home Insurance

Home insurance does not cover two main types of natural disasters, including floods and earthquakes.

Floods

Floods can occur for a variety of reasons, including:

• Tornadoes and hurricanes causing waters to rise
• Storms and heavy rains overflowing the rivers, creeks, and lakes near you
• Other natural disasters blocking drainage systems, causing water to enter your home

In all of these situations, a standard homeowners insurance policy would not cover the loss.

In fact, one of the biggest sources of insurance claim disputes is in how damage occurred to your home after a loss. Your insurance may cover hurricane damage but not flood damage, for example. Your insurer may argue that the damage occurred because of flooding (which isn’t covered), while you might insist it occurred because of wind and rain damage (which are covered). In situations with a major insurance dispute like this, you may want to hire a public adjuster.

If you live in a flood-prone area, then consider buying additional flood coverage. FEMA offers flood insurance through the National Flood Insurance Program. Insurers in your area should offer flood insurance through this program.

There’s a 30-day waiting period before flood coverage begins. Don’t wait until hurricane season before adding flood coverage to your policy.

Earthquakes

Standard home insurance does not cover earthquakes. However, if you live in an earthquake-prone area, then you may be able to add earthquake insurance to your policy.

In California, for example, the California Earthquake Authority provides earthquake insurance to residents of high-risk areas.

Similarly, standard home insurance typically does not cover damage resulting from an earthquake, including landslides, mudslides, and tsunamis.

Other Natural Disasters

Other natural disasters that usually aren’t covered by a standard home insurance policy include:

• Sinkholes
• Tsunamis
• Landslides and mudslides

Final Word

Check your policy today. You may be surprised by what’s included and excluded.
Don’t wait until it’s too late. Many homeowners don’t realize they lack flood coverage, for example, until a flood has already destroyed their home.

Read More Here: How Home Insurance Covers Natural Disasters

Why Insurers Deny Claims | Claimsmate Public Adjusters

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Your Home Insurer Denied Your Claim – What’s Next |Claimsmate Public Adjusters

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Preferred Contractors: Can You Trust Contractors Referred by Your Insurance Company?

These “preferred contractors” may be your insurer’s favorite contractors to work with. But will they do good work on your home? Should you hire these preferred contractors? Do you need to hire the preferred contractors?

Keep reading to discover what you should know about contractors working with insurance companies and preferred contractors for insurance claims.

Why Insurance Companies Like Preferred Contractors

Each insurance company has contractors they prefer working with instead of others.

• Your insurer will likely tell you they like preferred contractors because they do quality work, are professional and experienced, and have a long history of working with the insurer.
• In reality, most preferred contractors have an agreement in place where the contractor charges reduced rates for work in exchange for receiving higher volumes of work from the insurer.
• In other words, the preferred contractor receives less than they normally would to repair or restore your damage, saving the insurer money.

There’s nothing wrong with working with your insurer’s preferred contractor. However, you are not obligated to do so.

You Choose The Contractor For Your Claim

As a policyholder, you choose the contractor to repair your property after a loss.

You are not obligated to use your insurance company’s recommended contractor. Instead, it’s up to you who will handle your repair work.

Sometimes, the preferred contractor is the best option. In other cases, you might have a trusted local contractor you like better.

Do Your Research

When deciding whether to use the preferred contractor or another contractor, it’s important to do your research.

Preferred contractors aren’t bad. They often perform quality work and are trusted by large insurance companies.

However, another contractor might perform better repairs at the same price. They might have more experience with your specific type of loss, and they may be the better option for your insurance claim repairs.

• Do your research to determine the best contractor for your claim:
• Get referrals and references
• Talk to other people who have had similar claims
• Check the preferred contractor and other contractors on local review websites and the Better Business Bureau
• Ask the contractor about specific experience with your type of claim – like fire damage or water damage repairs

Feeling lost or overwhelmed about working with contractors for your insurance claim? State licensed insurance claim professionals are available to help with a free initial consultation.

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Preferred Contractors Versus Independent Contractors

It’s important to understand the differences between preferred contractors and independent contractors.

Here are some of the things to consider when deciding whether to hire a preferred contractor or an independent contractor:

Dealing with Your Insurer: When you hire a preferred contractor, they have firsthand experience dealing with your insurer. They may have a better understanding of what your insurer would typically cover, how much they’ll cover, and how to approach them about costs. An independent contractor may not have this same experience and knowledge. The preferred contractor may ask your insurer for permission to do certain repairs, for example, while an independent contractor might complete repairs and work with the insurance company to ensure those repairs are covered. Keep in mind: in many states, any kind of repair contractor is not legally allowed to interpret insurance policy language or negotiate claim settlements on behalf of the policyholder.

Preferred Contractors Get Paid Less for the Same Work: Generally, insurers have agreements with preferred contractors. The preferred contractor agrees to receive lower compensation than normal in exchange for a higher volume of work from the insurer. Instead of earning, say, $5,000 in profit for repairing your home after a loss, the preferred contractor might earn $3,500 in profit.

All Reputable Contractors Are Licensed, Bonded, and Insured: Whether you work with a preferred contractor or an independent contractor, you should be dealing with a licensed, bonded, and insured professional dedicated to repairing your home.

All Reputable Contractors Effectively Restore your Property to Pre-Loss Condition: Both preferred contractors and independent contractors should be entirely capable of restoring your property to pre-loss condition. Insurance companies shouldn’t be using low-quality contractors to perform shoddy repairs.

Get an Estimate from the Independent Contractor to Verify Costs Fit Your Claim: Sometimes, an independent contractor can’t repair your property as cheaply as a larger contractor. The preferred contractor may be a larger firm that can buy materials in bulk, for example, and undercut smaller competitors. Before working with an independent contractor, make sure their costs are within reach of your insurer’s payout. Otherwise, you could pay for repairs out of pocket.

Consider Hiring A Public Adjuster To Help Manage Your Claim

Major insurance claims are hard work. You need to decide on the right contractor. You need to make sure the insurance covers all damage to your property and home. You need to make sure you receive fair compensation for your loss.

Juggling all of these things can be a hassle.

That’s why many homeowners hire public adjusters to help manage an insurance claim for property damage.

A public adjuster is not a repair contractor. Public adjusters are state licensed insurance claim professionals that assist policyholders. The public adjuster manages your claim from start to finish. The public adjuster advocates for your best interests against the insurance company’s best interests. They analyze your claim and insurance policy, help oversee repairs, and ensure you receive every penny owed to you.

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Bottom Line On Working With Contractors For Insurance Claim Repairs

You shouldn’t feel like your insurance company is bullying you into using a specific contractor to repair your home.

You have the right to choose any contractor you like to repair your home. Sometimes, choosing the preferred contractor is the smart choice. In other cases, it’s better choosing an independent contractor for your claim.

Research contractors in your area to ensure you’re getting the best contractor for your project. Or, if you’re feeling overwhelmed, talk to a public adjuster to see how they can help expertly manage your claim.

See Full Article Here: Preferred Contractors: Can You Trust Contractors Referred by Your Insurance Company?

Reasons Insurance Companies Deny Fire Claims & How To Get Help

Could your insurance company deny your fire damage insurance claim? Keep reading to discover some of the most common reasons insurers deny fire damage insurance claims.

Arson or Suspicion of Arson

Insurance does not cover deliberate acts.

If you burn down your house intentionally because you want an insurance payout, for example, then insurance will deny your claim. Or, if you ask someone else to burn down your house, then insurance will still deny your claim.

However, insurance companies shouldn’t deny your claim simply because they suspect arson. Instead, they should provide concrete evidence.

If the insurance company denies your claim due to arson but has no proof, then the insurer may be acting in bad faith. An insurer could be denying the homeowner rightful compensation without cause.

Insurance Fraud

Insurers use many reasons to deny claims. If your insurer suspects you have committed insurance fraud, then your insurer may deny your claim.

The insurer may use different language about your suspected insurance fraud, including:

• The fire department was unable to determine the source of the fire
• The insurer believes you or someone else committed arson to defraud the insurer
• You are lying or hiding details about some aspect of your insurance claim

Misrepresentation

Insurance companies frequently deny claims due to “misrepresentation,” which is a way of saying you misrepresented certain things to your insurance company.

If your child tipped over a candle in a room, for example, and started a major fire, then you might lie and say the candle tipped over on its own. You might be worried that your insurer will deny your claim if you tell the truth.

You should always be upfront and honest with your insurer – especially with major fire damage insurance claims. Insurers can and will investigate the incident, and they could accuse you of misrepresentation if you lie about any aspect of your claim.

Illegal Activities

Insurance companies are not obligated to cover fires that were started because of illegal activities.

If you were running an illegal grow operation in your home, for example, and faulty electrical equipment led to a fire, then your insurer could deny your claim.

There are countless illegal activities that could lead your insurer to deny your claim. However, the most common activities include the manufacturing and selling of illicit substances, including drugs and alcohol.

Lack of Proof or Documentation

You must have evidence proving the loss, including documents proving the value of each item you lost.

If you claim a fire destroyed your $3,000 gaming PC, for example, then you might need evidence proving you owned a $3,000 gaming PC. Otherwise, your insurer could deny this part of your claim.

If you cannot verify the prices or value of items in your home, then your insurer is unlikely to cover these items (or, they’ll cover them at a reduced rate).

Unpermitted Electrical Work

There’s a reason you need to work with licensed, bonded, and insured electricians: they’re certified to perform quality work.

If an unlicensed electrician installed shoddy electrical work in your home, then it could negate or reduce your fire damage insurance claim.

As a homeowner, you are responsible for maintaining your home in good condition. You have an obligation to fix issues with all necessary permits and inspections.

If you failed to maintain your home’s electrical system by performing unpermitted work or attempting poor-quality DIY repairs, then your insurer could deny your claim.

Natural Weathering, Prior Damage, and Maintenance Issues

Your home develops maintenance issues over time, including natural weathering and other problems.

After a fire damage insurance claim, your insurer will not cover the cost of repairing or replacing any damage caused by natural wearing or maintenance issues.

Similarly, your insurer could reduce your claim because of previous damage. If damage already occurred before the fire, for example, then your insurer could reduce this part of your claim.

You Didn’t Take Preventative Measures

You need to take reasonable precautions to limit loss or damage to your insured property.

If you accidentally started a fire in your kitchen, for example, and then simply left the house to run errands, then your insurer might deny your claim. You did not use a fire extinguisher to control the blaze, nor did you attempt to call emergency services.

As long as it’s safe to do so, you must take reasonable steps to limit fire damage – or at least contact emergency services as soon as possible.

Missed Insurance Premiums

If you missed paying your insurance premiums, or if you did not pay your latest premiums on time, then your insurer could deny your claim.

As a policyholder, you have an obligation to pay premiums on time. If you did not live up to this obligation, then your insurer could deny your fire damage claim.

Denying, Delaying, or Underpaying Claims

Sometimes, the insurance company doesn’t deny your claim outright; instead, the insurer delays or underpays your claim.

Insurance companies may drag their feet on a major fire damage insurance claim, for example. It’s a costly claim, and the insurance company wants to be thorough.

However, some insurers may use delays as a negotiation tactic, knowing that policyholders are more likely to accept a smaller payout after weeks of stress and delays.

An insurance company may demand excessive evidence, challenge every aspect of your claim, and use every possible excuse to delay or reduce a claim settlement.

In all of these situations, the insurer may not be acting in good faith. Insurers need to respond to policyholders in a timely manner. Otherwise, they’re acting in bad faith.

Steps to Take When the Insurer Denies a Fire Damage Claim

If an insurer denies or reduces your claim, then it’s not the end of your claim. Instead, you can fight back, negotiate, and ensure you receive every penny owed to you in compensation.

Here are the steps to take when the insurer denies your fire damage claim:

• Ask for Written Justification: Your insurer needs to provide written justification for claim denial. Most insurers are thorough with their documentation, but be sure to receive a copy of all documents. You may need this documented evidence for future negotiations.
• Hire a Public Adjuster: Public adjusters are licensed insurance professionals who represent your best interests – not your insurer’s best interests. Hire a public adjuster to negotiate with the insurer on your behalf. A good public adjuster manages your claim from start to finish while obtaining the highest possible amount of compensation.
• Review your Home Insurance Policy: Sometimes, your home insurance policy doesn’t cover everything you thought it did. Ideally, you’ll review your policy before a loss. However, reviewing your policy after a loss can determine if your insurance company is taking advantage of you – or if your policy legitimately does not cover certain items you thought it did.

Final Word: Insurers Use Any Reason to Deny a Fire Insurance Claim

Insurance companies aren’t on your side. Insurance companies are for-profit businesses that want to pay as little for claim settlements as legally possible.

Insurers may use any number of reasons to deny or reduce a fire insurance claim.

Hire professional help, review your policy regularly, and document your claim to ensure your insurer has no reason to deny your fire insurance claim.

Post Source Here: Reasons Insurance Companies Deny Fire Claims & How To Get Help

How Do Insurance Adjusters Estimate Claims To Determine Home Damage?

How do insurance companies estimate roof damage, fire damage, and burst pipe water damage? How should you deal with your insurance company during the estimation process? Keep reading to discover everything you need to know about how insurance adjusters estimate home damage.

What Insurance Adjusters Do

Your company employs salaried workers or independent contract workers called adjusters. These adjusters respond to claims, assess damages, and assist with handling payouts to policyholders.

Here’s how United Policyholders explains the role of the insurance company’s adjuster:
“Insurance adjusters work for the insurance company and are responsible for preparing an estimate of the cost of repair or replacement of the insured’s property loss.”

Sometimes, it’s easy to assess damage. If someone broke into your house and stole your $4,000 TV, for example, then your insurance company can compensate you based on that loss.

In most cases, however, assessing damage is more complicated. It requires technical skills, in-depth knowledge, and careful analysis.

How to Document Costs

After a loss, the insurance adjuster may ask you to document costs. The insurance company won’t immediately approve the rebuilding of your home. Instead, the adjuster needs to document the damage, verify costs, and compensate you based on the specific damages and losses.

The goal with documenting costs is to create an accurate image of the pre-loss condition of the home.

Every home is different. Your home may have similar square footage to another home, but it has different interior finishes that affect the cost.

After a loss, the insurance adjuster interviews the policyholder to create a “scope of loss.” The adjuster wants to determine what was damaged and what home insurance covers.

The insurance adjuster also wants to determine the damage occurred because of the specific loss. If your roof was damaged in a hailstorm, for example, then the insurer wants to make sure the damage was not already present and you’re using the hailstorm as an excuse to make a claim.

Insurance Adjusters Use Xactimate to Estimate Damages

Most insurance adjusters use a program called Xactimate to analyze damages. After a loss, your adjuster may provide you with an estimate from Xactimate.

These tips will help you understand your Xactimate estimate and what it means:

Organization by Room: Xactimate orders damages by room. Sometimes, this is fine. If damage was contained to one or two rooms, then it’s easy to verify that in the Xactimate report. In many cases, however, damage occurred to different systems of your home that aren’t contained to specific rooms. A fire in your kitchen, for example, may damage your entire HVAC system. The room-by-room analysis can also cause the adjuster to miss major functional problems within the building.

“Scope of Loss”: Scope of loss refers to the damage that falls under the recent claim. When a fire damages your home, for example, the scope of loss includes everything damaged by that fire – not any previous damage that already occurred to your home. The scope of loss should include any and all damages to your home caused by the latest incident. Even the best adjusters might miss certain damages in their Xactimate estimate.

Room Dimensions: The Xactimate estimate includes the dimensions of each room. Your insurer uses these dimensions to calculate approximate repair costs. However, there may be mistakes with these dimensions. Even a minor measuring error can lead to 10% to 20% smaller room sizes, for example, which could affect compensation by thousands of dollars.

Waste Factors: When building a home or repairing a home, you don’t use 100% of building materials to complete the project. Instead, there are waste factors. Good estimates take waste factors into account, adding around 5% to each room. One construction expert providing tips on United Policyholders, for example, recommends checking the Xactimate estimate to verify there’s at least 5% more carpet than square footage per room.

Contractor Overhead and Profit (OH&P): The insurance company adjuster can add contractor overhead and profit (OH&P) into the Xactimate estimate. Sometimes, they include it in the line-by-line estimates. In other cases, they add it to the bottom of the estimate. Your Xactimate estimate should typically include around 20% OH&P for a single-family home.

Market Conditions: The insurance adjuster can add market conditions into the Xactimate estimate. The adjuster changes unit cost pricing based on market conditions and regional factors. If the price of lumber has recently skyrocketed, for example, then that needs to be factored into the estimate.

Cost Database: Xactimate has a cost database that covers everything needed to repair your home, including unit costs, labor, and material. Xactimate breaks down costs by city and region. The cover of the estimate features an alpha-numeric code with the heading “Price List,” for example. The code might have the letters “CA” For California and “SD” for San Diego. Then, the code features a letter indicating the year and quarter of the list. 22D, for example, might mean the price list is from the fourth quarter of 2022.

Added Costs and Soft Costs: There are added costs associated with building or repairing a home, including the cost of hiring an engineer or architect, any city fees and permits, construction insurance, and liability insurance for the general contractor, among other costs. Your Xactimate estimate should build these soft costs into the amount.

Insurance companies use Xactimate to estimate all types of damage, including fire damage, water damage, burst pipe insurance claim damage, and other incidents.

It’s Tough to Negotiate Costs With Your Insurance Adjuster Without Professional Help

As an ordinary homeowner, you don’t have the technical knowledge to assess building costs.

Even armed with the knowledge above, you may not be qualified to dispute building costs on your Xactimate estimate.

Some experts recommend buying construction cost manuals, which are technical manuals explaining construction costs in your area.

Or, you can hire a public adjuster near you to help dispute costs. Public adjusters may get a second opinion from a trusted local builder, for example, that changes the insurance adjuster’s Xactimate estimate.

Other Tips for Dealing with Insurance Adjusters

It’s important to maintain a good professional relationship with your insurance adjuster. Some tips for dealing with your insurance company include:

• Understand you need to respond to your insurance company in a timely manner, including reporting the loss within a certain length of time
• Your insurance company is legally obliged to act in good faith
• You have the upper hand because you only deal with one claim, but your insurance adjuster is juggling multiple claims
• Avoid giving the adjuster a recorded statement
• Don’t settle your insurance claim too quickly
• Remember anything you say to your insurance adjuster can hurt you, and a single misspoken statement can nullify your claim

For our ultimate guide on dealing with insurance adjusters, click here.

Having A Licensed Insurance Adjuster On Your Side

Your insurance company’s adjuster likely uses a program called Xactimate to help analyze and estimate damages and the costs to repair.

Based on the estimate, the insurance company may often pay anywhere from 20% to 50% less than you deserve for your claim.

To ensure you get the compensation rightfully owed to you, consider hiring your own public adjuster to fight back against your insurance company. Schedule a free consultation with ClaimsMate today.

Original Post Here: How Do Insurance Adjusters Estimate Claims To Determine Home Damage?