What is the Home Insurance Claim Process?

Filing a home insurance claim can be a complex process involving numerous forms of documentation and many steps.

What Is Home Insurance?

Homeowners insurance is a type of insurance policy which covers damage and theft of a home and its possessions. Nearly all mortgage companies require home insurance as a part of their loan agreements, making the insurance a necessity for most homeowners.

There are several types of coverage provided by homeowners’ insurance policies. The main three types of policies are:

• Actual cash value coverage: Covers the cost of the insured home and the homeowner’s belongings, with depreciation deductions.
• Replacement cost coverage: Covers the actual cash value of the insured home and belongings without depreciation, providing payments to repair, replace, or rebuild damaged property.
• Guaranteed/extended replacement value coverage: Most comprehensive home insurance policy. Covers the costs to repair or rebuild a home, even if it exceeds the policy value limit by up to 25%.

Under these policies, varying amounts of damage due to fire, hurricanes, lightning, and other disasters may be covered. However, coverage for floods, earthquakes, and poor maintenance may not be included and may need additional policies or riders if homeowners are worried about these risks.

Home structures damaged by disasters are not the only items covered by home insurance policies. Clothing, furniture, appliances, and other possessions damaged by disasters, theft, or vandalism may also be covered by home insurance policies.

What Is the Home Insurance Claim Process?

Although the claims process will vary depending on the insurance company and situation, the following steps may be used in nearly every process:

• File a police report: Although this will only be necessary in cases of theft or vandalism, this step is usually required to initiate the claims process in this situation.
• Contact the insurance company: Getting into contact with your insurance company as soon as possible can help jumpstart the claims process.
• Document your incident: Write down the date, time, and details of the incident. Photos, videotapes, and other documentation of a disaster or other incident are essential in filing a claim. Be sure to be thorough to maximize your potential for a large payout. If you have additional living expenses after being forced to leave your home, keep those receipts for potential reimbursement.
• Make temporary repairs: Although permanent repairs can wait until after the adjustment process, temporary repairs can be done for water damage, leaky roofs, or other issues which make a home unlivable. Make sure to keep receipts of these repairs for later reimbursement.
• Adjustment process: After you call your insurance company to start the home insurance claim process, they will assign you an adjuster. Your insurance adjuster will evaluate the damage to your home and estimate costs for replacement or repairs.

Consumers can always speak to their insurance representative or a qualified legal professional if they have questions about the claims or appeal process.

What If My Homeowners Insurance Claim Was Underpaid?

If you’re unhappy with the estimate from your insurer, you may want to hire a public adjuster to evaluate your home’s damage. Although this step is not necessary for the claims process, it can be helpful for the appeal process. In fact, the Florida State Legislature’s Office of Program Policy Analysis and Government Accountability found that using a public adjuster resulted in 574% higher compensation for non-hurricane insurance claims and 747% higher payments for hurricane-related claims.

Unfortunately, hiring a public adjuster may not be the perfect solution for everyone. In some cases, your claim may be underpaid by your insurance company if they depreciate the cost of labor required to fix or replace parts of your home.

Although depreciation helps to account for the actual value of possessions or the home, it is not always permitted to depreciate the cost of labor. If your insurance policy terms do not include the fact that your insurer may depreciate the costs of labor and materials, you may be protected from these deductions.

Legal precedent may also play a role. For example, the Sixth U.S. Circuit Court of Appeals has ruled that an insurer may not be entitled to depreciate the cost of labor and materials in home insurance claims. However, the North Carolina Supreme Court made the opposite determination in 2020.

Understanding the relationship between your policy terms and legal precedent which applies to your state can be complicated. However, an experienced legal professional can help you navigate these muddy waters to determine your eligibility for legal action.