When your home incurs damage, the first thing you’ll do is contact your insurance company to make a claim (We recommend you contact a Public Adjuster to help you with the insurance claim process). From there on out, you may be in for some unpleasant surprises. Most homeowners assume—rightly so—that as long as you pay your homeowner’s premiums on time, your insurance company will make restitution in full, you’ll get your home repaired and all will be right with the world. Unfortunately, reality can be slightly less straightforward.
1. Unless your Home is Paid Off, Your Mortgage Company Will be Listed As a Payee
Hold your breath when you open that envelope containing a check from your insurance company. Your lender is probably listed as a “loss payee” on the documents, so the check will be made out to both you and the lender. The mortgage company needs to make sure that you use the money to fix the asset—your house—and not for any other purpose. So you’ll have to sign the check over to them. They’ll have the right to hold it in escrow, paying out installments to you as repairs are completed. In the meantime, you could be stuck paying for repairs out of pocket until you get reimbursed.
2. You Should Never Endorse or Deposit a Check Marked as Final
Some less scrupulous insurance companies may try a certain tactic that can get them out of paying for additional needed repairs. They may send you a check marked as “full and final settlement.” If you ever receive a check like this, or a letter along with the check with wording that indicates that endorsement or deposit of the check indicates your acceptance of it as “full and final payment,” do not touch that check. Don’t write on, deposit it, or try to cash it. Doing so will prevent you from getting any more money from your insurer even if you have more repair bills coming in.
3. You Might be Underinsured
Another big shocker that homeowners often find out too late is that they’re underinsured. Chances are you bought your homeowner’s insurance at the same time you purchased your home. Since then you’ve probably made some improvements; maybe you’ve added a new room, a screened-in porch, or finished the attic or basement. But did you remember to update your insurance policy with the new appraised value? If not, you probably won’t get full value for your home in the event of a partial or complete loss.
4. It Might Be Cheaper to Rebuild Than Repair
Insurance companies always want to pay as little as possible. If it’s cheaper to construct from scratch than to repair your home, that’s what they’ll be willing to pay for. This is often the case with older homes that may not be up to current building code requirements.
5. Your Insurance Claims Adjuster Doesn’t Represent Your Interests
The biggest mistake homeowners make is not realizing that insurance claims adjusters represent the insurance company’s interests, not the homeowners. Hire a public insurance adjuster who is there to make sure you get the most advantageous outcome for your needs, not the insurance companies.
Many homeowners encounter a succession of unexpected obstacles that take them by complete surprise. To avoid getting caught in this web, remember these five things you should be aware of when going through the insurance claims process.