Dealing with Insurance Companies After Fire Damage: What to Know

In 2017, more than $23,000,000,000.00 of property were damaged due to fires in the United States.

If you have a mortgage on your house, homeowners insurance is required. Even so, since your house is sometimes your biggest investment, you will want it protected by insurance.

What happens after a fire damages my house?

More often than not, the following scenario will play out after a house fire.  After notifying your homeowner’s insurance carrier, an insurance adjuster will come out to meet you at your house.  If the insurance company accepts liability, the insurance adjuster will recommend a cleaning or restoration contractor who will come in, remove your belongings, and attempt to restore them.  What the adjuster will fail to mention, however, is that the cleaning contractor now has carte blanche power to charge YOUR claim dollars on cleaning property which may or may not be deemed salvageable.  This is simply the beginning of the ride that the insurance company is going to take you on unless you know  their tactics and control your own claims process.  Below are some tips and information that could help you on your path to being made whole after a fire.

Choosing your own Vendors

The days and weeks after a catastrophic fire can seem to blend together and it can be tough to tell an insurance carrier to slow down because you just want to salvage what’s left of your property.  But, accepting a “recommended” vendor can be a huge mistake.  Firstly, you must remember that insurance carriers are not in the business of going above and beyond for their insured’s to their own detriment.  A recommendation should raise a red flag as to whether the vendor works in the best interest of the insured or the insurance carrier.  You have the right to choose your own restoration company, and we advise our clients that a little research on the front end can save you a lot of time on the back end.

Approving the Quote

You don’t have to accept the insurance companies recommended vendors.

First, make every effort to ensure that you are informed before work is approved to restore your belongings.  Ask for prices. Do you really want to pay a company to take your smoke damaged belongings and attempt to clean them when they can’t be cleaned?  Since the insurance company owes the price to clean the items whether they are cleaned or not, it usually makes more sense to attempt to salvage irreplaceable, sentimental items and take the cash value for the remaining items.  The majority of money spent on restoration is profit.  In fact, restoration contractors aim for a profit margin of almost 75%!

Whose Side is the Cleaning Guy on?

Because the vast majority of cleaning and restoration operations are paid solely by insurance companies, it’s easy to know who their boss is.  In fact, most arrangements between insurance carriers and restoration companies involve an upfront partial payment, and a subsequent payment after the insured accepts the “cleaned” items.  Therefore, if you choose to use the insurance companies preferred vendors, you have walked into a trap in which the restoration companies are incentivized to insist that the items have been properly cleaned so they can receive the rest of their payment.

Actual Cash Value or Replacement Cash Value?

Review your insurance policy. In simple terms, actual cash value (ACV) refers to what an item is worth present day, not when you bought it.  In other words, ACV involves a depreciation calculation which could make your items possibly worthless in the insurance evaluation.

Replacement cash value (RCV) means that your property is covered up to the full cost of replacing it.  RCV contracts are not as common due to their chance for a significantly higher payout.  While replacement cost value policies typically cost more, depending on the items these policies insure, the higher premiums may be worth it.

In conclusion, make sure you know your rights if a fire strikes. Know that your insurance company is in the business of making money and to do so, they have to pay as little as possible to you for your damage. Know that you don’t have to choose their vendor and always ask for quotes. If you need any help with your fire damage claim, we are here to help.

Should you have any questions or you would like to discuss this issue in further detail, please do not hesitate to contact us to schedule a free consultation.