Let’s start off with the facts: in 2010, there were more than 360,000 residential fires, according to the U.S. Fire Administration, These home fires accounted for $6.6 billion worth of damage. 166,000 of the fires were cooking-related, 46,000 were fireplace-related and 26,000 were the result of electrical malfunctions, the organization reports. Do you have the right fire insurance?
Your Homeowner’s Insurance Policy
Homeowner’s policies insure both your building and its contents against fire damage. Typically, the Insurance Information Institute states, the contents–personal property including furniture, clothes and books–will be covered for 50 to 70 percent of the building coverage. For example, if your policy insures your house for $320,000, your contents could be covered for at least $160,000. Many policies limit how much they’ll pay for individual items–a fur coat, a diamond necklace or a Picasso painting, for instance–so if you have something expensive, you may need to buy extra coverage.
If your home burns, your homeowner’s insurance can cover the cost of rebuilding it. Homeowners typically buy either HO-2 insurance, which protects against a list of 16 specific damages, or HO-3 insurance, which protects against any damage not specifically exempted. Even the more restrictive HO-1 policy will cover damage to your home from fire.
Homeowner’s insurance comes in several forms, the Insurance Information Institute states. If you take out an actual-cash-value policy, it will pay the original purchase price of whatever was burned, less depreciation for the years that you’ve owned it. Replacement-value policies cost more, but will cover the cost of rebuilding or replacing damaged property, which is likely more than the depreciated purchase price. Guaranteed or extended-replacement-value policies cover replacement costs even if they exceed your total coverage.
If your home is temporarily uninhabitable because of a fire, or while damage is being repaired, most policies offer additional living expenses, according to the Insurance Information Institute. This includes renting living space and paying extra for food. The coverage is usually 20 percent of the policy’s value–on that $320,000 home, the amount would be $64,000–but you can elect to pay extra to raise that amount.
Homeowner’s insurance also covers vandalism and intentional destruction of your property, but not if the person responsible is a member of your household, MSN Money Central states.
After the Fire: 10 Tips to Keep in Mind
After you have had a fire, here are ten tips to keep in mind as you interact with your insurance company and its adjustors.
1. Get an Advance
Ask your insurance company for an advance against your eventual claim. Ask a representative of the company to bring a check to you wherever you’re staying, be it a hotel or a friend’s house. Save the receipts for everything you buy.
2. Secure Your Property
Every policy requires you to take reasonable steps to minimize the harm to your property. In legalese, this is known as your duty to “mitigate damages.” It includes covering a section of your leaky roof with a plastic tarp until you can get it repaired, or turning off the water when you discover a burst pipe. Your insurance company will pay these costs to minimize harm when you make your claim. Other steps you might need to take to mitigate damages include:
Stop the smoldering. After a fire, if the structure is still burning, contact the fire department to do what’s necessary to prevent a flare-up.
Board it up. To prevent vandalism, board up your property and consider erecting a portable chain-link fence to keep people away.
Be vigilant. Depending on the situation, you may need to keep a close eye on your property, checking for new problems and making sure it hasn’t been disturbed.
If your house has been damaged rather than destroyed, interior cleanup will be required. Keep in mind that damage to the property often goes beyond what the eye can see. (Removal of a destroyed house should only be done by professionals.)
If water hoses were used to put out the fire, drying your home is very important. It is best to hire professionals to do fire and water combination clean up. Water damage can lead to even more damage or mold if not dried properly.
Insurance companies will often have approved restoration contractors that you can call for board up (or use 1-800-BoardUp), structural drying, contents cleaning, and structural cleaning and repair. The Better Business Bureau and Angie’s List are also good resources to find trustworthy contractors.
3. Get a Fire Report
A fire report will discuss what kind of structure the house was in, what area was involved, the time of the incident, the date of the incident and an incident number. This report enables the fire department to know all the specifics of who was there and what resources were there. You may be able to contact the fire department for a copy. For example, in Los Angeles, you can call the Fire Prevention Bureau, the Fire Marshall or the billing agency of the fire department. If arson is involved, the Arson Unit or equivalent will probably be able to get this information to you.
4. File Your Claim Right Away
All policies require homeowners to report their loss as soon as is reasonably possible and to do what is reasonable to prevent further loss. You can comply with the requirement to report by calling your independent insurance agent or sending an email. After that, you’ll be asked to submit a “proof of loss claim,” in which you itemize your losses and list the value. (As a first step, be proactive! Document your possessions ahead of time. Follow the guidance in, “Preparing a Home Inventory in Case Your Property Gets Damaged or Stolen.”)
When you deal with an insurance company over a major claim, it’s best to be organized. Calls, emails, and letters can be crucial pieces of evidence if you and the company later differ as to who said what to whom, and when. Take notes during every phone call, and organize your communication in one section of a three-ring binder. Use other sections to store estimates, invoices, bills, permits, and contracts for repairs. Never part with an original document; if your insurance company wants to see an invoice or bid, make it a copy.
5. Make Sure the Insurance Company Acts Promptly
Fortunately, insurance companies are required to handle claims in a timely manner. In California, for example, they must send you a “notice of intentions” within 30 days of receiving your claim. If there’s no dispute over your coverage, you’re entitled to payment within that time, too. If you haven’t heard from your company and you feel that it’s unnecessarily dragging its heels, write to it (and consider sending a copy to your state’s Department of Insurance). Insurance companies are less likely to string you along when they’re in the midst of a disaster and know that all eyes are on them. Insurance companies want to handle claims quickly because it is good for business, so if you feel like things are progressing slowly, something is probably amiss and they will be happy to have a nudge.
6. Keep Track of Your Living Expenses
Your policy will include a “loss of use” clause, which entitles you to reimbursement for living expenses while you’re out of your home. However, you’re entitled only to additional living expenses (see tip #1, above) — that is, the difference between what it costs you to live on a daily basis at home and what it costs now. For example, if you ate most meals at home before the fire and regularly spent $300 a week on groceries, but are now spending $400 per week at restaurants, you can claim only $100.
When it comes to the motel bill, however, you can probably claim the whole thing. Even though you can’t live at home, you still have to pay your mortgage, taxes, and insurance.
Many evacuees stay with friends or family, often on an extended basis. Even though you probably aren’t paying your hosts, you may be able to convince your insurance company to reimburse them for the cost of putting you up. Ask your hosts to itemize the value of the room and services they’re providing.
7. Get the Right Repair Estimates
Your homeowner’s policy will enable you to rebuild or repair your home. If you have an “actual cash value” policy, you’re entitled to the amount of money it will take to return your home or its contents to its market value before the fire. In case of a total loss, if you’re in a valued policy state you will receive the amount of the policy for your home. You need to prove your loss for contents.
As we mentioned earlier, if you have “replacement cost” coverage, you’re entitled to the amount it would take to replace the home or contents, up to a limit that was fixed in your policy in advance. (Only a rare type of policy, called “guaranteed replacement” coverage, actually lets you claim all of your actual rebuilding costs.)
8. Keep Paying Those Premiums
You may ask, “Why should I pay homeowners’ insurance premiums when my home is gone?”
Yes, it may seem foolish to continue paying homeowners’ insurance premiums to protect property that’s severely damaged or even gone, but stopping your payments can be a big mistake. Remember, your homeowners’ policy includes liability protection for you and your household, including your pets.
If you’ll be staying somewhere for a while, call your independent insurance agent and ask for that address to be added as a second location for purposes of liability coverage. If your home has been destroyed, ask your insurance company to cut back on the part of the policy that covers the structure, and ask for a corresponding reduction in premiums.
9. It’s Not Over Until You Say So
Your insurance company will want to close your claim as soon as possible. The longer it’s open, the greater the chance that you’ll discover and file a claim for an additional loss. But homeowners often discover losses that they initially overlooked, perhaps because of the stress of living through the disaster. Protect against this possibility by waiting at least a few months before allowing your claim to be closed.
Don’t be surprised if you receive a check from the insurance company saying that you’re accepting the payment “in full release of” your claim. Don’t believe it, and don’t let it stand. Cross-out that language (and initial it), then send a letter to the company, politely thanking them for the check and telling them that you do not consider the matter to be closed.
10. Consider Hiring a Public Adjuster
Despite hiring your own estimator or contractor, you may not be able to reach an acceptable settlement of your claim. In that event, consider hiring a “public adjuster:” an independent, licensed adjuster whom you pay to negotiate with the insurance company on your behalf. You’ll typically pay the adjuster between 9-15% of what you recover from the insurance company, but that can be well worth it if the adjuster succeeds in significantly increasing the settlement. To find a public adjuster, start with the National Association of Public Insurance Adjusters, the national organization that regulates public adjusters, at www.napia.com.
Regarding Public Adjusters: A Real-Life Fire Story
“About 10 years ago my house burned to the ground,” says Rachel Pickett. “I was devastated at my loss and confused by all the attention I was receiving. I remember staring at my own tear streaked face in the local newspaper covering the story, and all I could do for weeks was to shake my head in disbelief.”
Rachel Pickett goes on to offer this advice: “Strangers, neighbors, family, and good Samaritans will offer all kinds of services and hospitalities right after your house fire but it is best to avoid them all. The first thing you should do is call your home insurer right away. An adjuster should arrive immediately to help you sort things out. Often your home insurance will cover living expenses for up to 12 months after a home fire and your claims agent will also help you document your losses.
As I was standing across the street at a neighbor’s home, watching the firemen tame the blaze at my own house I received a telephone call from a person identifying themselves as the County Fire Marshall. They then asked for my information; phone number, address, my insurer’s name, and then asked if I had a public adjuster. I answered all his questions and then we talked briefly; he said he would be calling later in the week. Later that night, while at my father’s house the phone started ringing off the hook. At least 15 people called to offer their services boarding up my home and cataloging my losses. It was only then that I realized I had been scammed. No reputable business would call in the middle of the night, and besides that where did all of these people get my phone number?
Chances are many public adjusters will be calling after your house fire, but be careful. It’s best to know who you are dealing with before you agree to any services. A public adjuster will help you board up your home, count your losses, and sometimes help you find a temporary rental or cheap buy. Public adjusters are bonded and licensed by the state but in most places competition is fierce. A dozen businesses will be banging your door down and they may be good at what they do, but there is no way for you to know this. The best thing to do is get a business card and a reference and then tell them to have a nice day. Do your homework before you hire a public adjuster by checking with friends, family, and your lawyer to see who may be a good choice for you.”
Some other Enhanced Insurance articles related to Home Insurance:
Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.
While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.