How does fire insurance claim work?

Homeowners whose home has been damaged or destroyed will look to their insurance for relief with varying degrees of success. As you interact with your insurance company and its adjusters, here are tips to keep in mind.

Consider getting an advance.

You might not have picked up necessities if you were forced to evacuate your home—from a toothbrush to clothes you can wear to work. Your homeowners' policy will cover the cost of replacing these items, but you do not have to file a claim and have it accepted before heading to a department store to buy the suit you need for the office.

Instead, ask for an advance against your eventual claim from your company. Ask a company representative to bring you a check wherever you stay, be it a hotel or the house of a friend. If you've lost khakis and a blazer, don't head for the Armani suits (you'll end up paying the difference). Save the receipts for everything you purchase and be consistent.

Check your policy—even if you have replacement coverage for the house itself, you may only have an actual cash value for the personal items in your home. An experienced insurance agent will alert you to this and suggest that you buy an endorsement to cover your content under a replacement policy.

Consider enlisting an advocate.

If you are uncertain whether you should file an insurance claim, you should contact a knowledgeable insurance attorney. Many experienced home insurance lawyers only charge money for the disputed portions. Insurance companies spread myths, causing concern that clients will not hire a lawyer because they are too expensive. A home insurance lawyer will help you get a lot more. Almost all the statistics show that insurance providers pay more to consumers by hiring an experienced insurance lawyer.

Protect your property

Each policy requires that you take reasonable steps to minimize the damage to your assets. This is known as your obligation to mitigate the damage. In legal terms, it involves such common-sense steps as covering a portion of your leaky roof with a plastic tarp until you can repair it or turn off the water when a burst pipe is discovered. These costs will be paid by your insurance company when you make your claim. Other steps that you may need to take to reduce damage include:

Stop the smoldering operation. If the structure is still burning after a fire, contact the fire department to do what is essential to prevent a flare-up.

Just board it up. Board up your property to prevent vandalism and consider erecting a portable chain-link fence to keep individuals away.

Be alert. You may need to keep a close focus on your resources, check for new problems and make sure it hasn't been disturbed, depending on the situation.

Filing your claim right away

All policies require homeowners, as soon as reasonably possible, to report their losses. By contacting your agent or sending an email, you can comply. You will then be asked to submit a proof of loss claim in which you will detail your losses and list the value. If you delay notifying your company, you may be far down on the list when it comes time for the company to send an adjuster to deal with your claim.

Get organized (or hire an expert to do this for you)

It would be best if you were organized when dealing with an insurance company over a significant claim. If you and the company later disagree about who said what and when, calls, emails, and letters can be crucial pieces of evidence. During each phone call, take notes and organize your communication in one section of the binder. Other areas are used to store estimates, invoices, bills, permits, and repair contracts. Never part with an original document; make it a copy of your insurance company's wishes to see an invoice or bid.

Be prompt

Luckily, insurance firms are required to deal with claims promptly. In California, for example, within 30 days of receiving your request, they must send you a notice of intentions. You are entitled to payment within that time, too, if there is no dispute over your coverage. If you have not heard from your company and feel it is dragging its heels unnecessarily, write to it (and contemplate sending a copy to your state's Department of Insurance). When they're in the midst of a catastrophe, insurance companies are less likely to string you along and know that all eyes are on them.

Keep an eye on your living costs.

A loss of use clause will be included in your policy, which entitles you to reimbursement for living expenses while you are out of your house. You're only allowed additional living expenses, though—that is, the difference between what it costs you to live at home daily and what it now costs. For instance, if you ate most meals at your residence before the fire and spent $300 a week on groceries regularly, but spend $400 a week at restaurants now, you can only claim $100.

However, when it comes to the motel bill, you can probably claim the entire thing. You still have to pay your mortgage, taxes, and insurance even though you can't live at home.

Were you living with family or friends?

Many evacuees stay, often on an extended basis, with friends or family. You may be able to persuade your insurance company to reimburse them for the cost of putting you up, even though you're probably not paying your hosts. Ask your hosts to highlight the value of the space and the services they provide. Be reasonable and specific, and be willing to negotiate this with your insurance company. If you chose to stay in a lodge and dine in a restaurant, it could help point out how much more the company would have had to shell out.

Get the right estimates for repair.

Your homeowner's policy will allow you to rebuild your home or repair it. Suppose you have an actual cash value policy. In that case, you are entitled to the amount of money it will take to return your home or its contents before the fire to its market value—which may be significantly less than what you will need for a quality reconstruction if it was run down and needed a new roof.

If you have coverage for replacement costs, you are entitled to the amount it would take to replace the house or contents, up to a limit set in your policy beforehand. (Only a rare type of policy, called guaranteed replacement coverage, actually allows you to claim all the actual costs of your reconstruction.)

You don't have to reconstruct

That doesn't mean you have to rebuild your home on the same site if you have replacement coverage. You can reconstruct a different location (if it costs more to build in Hawaii, you pay the difference). Suppose you choose to use the cash for something else, such as starting your own business or creating a retirement fund. In that case, your replacement policy will change to a policy of actual cash value (you will get about 15 percent less in general terms).

You'll need an estimate of the initial market value or the cost to replace the damaged items or parts for either type of coverage. Your insurance company, supplied by its adjustors, will offer its estimates. Because these adjusters are working for the insurance company, getting you to accept a modest settlement quickly is in their best interests. You do not have any duty to obtain these numbers.

Hire an independent estimator instead, who will work for you (and be paid by you). Select a contractor experienced not only in construction but also in how typical problems are addressed by insurance companies. Be sure that if you substitute or repair, you and the insurance company agree on the scope of work to be done. If you are dealing with a real cash value policy, don't accept the insurance company's number unless you are satisfied that it is a fair estimate of what a buyer would have paid for your home just before the catastrophe (not including the value of the land).

Considering continuing paying your home insurance policy.

It may seem ridiculous to continue paying homeowners' insurance premiums to protect property that is severely damaged or gone. Still, it can be a big mistake to stop your payments. Remember, your homeowners' policy involves liability protection, including your pets, for you and your household. This may come in handy if, for instance, while you are camped out at your brother-in-law's, your stressed-out dog chews up an expensive oriental rug.

If you're going to stay somewhere for a while, call your agent and ask for that address to be added as a second-place for liability coverage purposes. You can ask your insurance company to cut back on the part of the policy that covers the structure if your home has been destroyed and ask for a corresponding reduction in premiums.

This isn't over till you say so.

As soon as possible, your insurance company will want to close your claim. The longer it is open, the greater the chance you will discover an additional loss and file a claim. But homeowners often find losses, perhaps because of the stress of living through the disaster they initially ignored. By waiting at least a few months before allowing your claim to be closed, protect against this possibility.

If you receive a check from the insurance company that you accept the payment in full release of your claim, don't be surprised. Don't trust it, and don't allow it to stand. Send a letter to the company to cross-out that language (and initial it), politely thank them for the check, and tell them that you do not think the matter is closed.

Don't worry about your loss of insurance.

You probably know that drivers who have suffered an accident or two often face higher premiums for car insurance or even lose their coverage. Fortunately, for homeowners who file legitimate damage claims following a catastrophe such as a fire, this is not a realistic fear. As long as you are not what the sector calls a normal claimant and there is no evidence of fraud concerning your claim, you will not see an increase in your premiums or lose your coverage.

Don't make assumptions.

Please bear in mind that you are not a specialist in home insurance claims. Also, don't believe that your insurance company always has your best interest at heart. An experienced home insurance lawyer will obtain expert reports for consumers. Allow your specialists to decide what is covered or not. It is also wise for consumers to allow their experts to consider the value of this loss. Consumers can use these reports to substantiate the importance of the loss.

Stop giving your money to crooked insurance companies.

Instead of paying legitimate insurance claims, consumers are smart enough to stop buying insurance from businesses by wasting insured's premiums on pressing state officials for favorable laws and slick television ads. Insurance companies like State Farm have a nasty reputation for tricking customers and denying perfectly valid requests. My law firm has discovered in the last 12 years that the only way to keep our customers from being victimized by greedy insurance providers is not to buy insurance from the crooked ones. If you have State Farm, it is recommended that you immediately get a different insurance carrier.