Take steps to file homeowners' insurance claims

Information Institute has established a hurricane insurance information center at www.disasterinformation.org. It provides helpful information for all homeowners, regardless of whether they are in areas affected by the recent hurricanes. The Web site includes contact information for insurance companies, state insurance departments and the National Flood Insurance Program.

The Institute also has a publication, “Settling Insurance Claims after a Disaster,” which can be found online as well. Topic areas include:

Filing a claim. Contact your insurance agency or company to report your damages. Confirm that your policy’s terms cover the damages so that you can file a claim. Also confirm that the claim exceeds the policy deductible and whether you need estimates for repairs.

Getting ready for the adjuster. Fill out a form that you will receive with descriptions of damaged and destroyed items, dates of purchase, original costs and replacement costs.

When the insurance company sends out an adjuster to assess the damage, be prepared to show all the structural damage in and around the house and to provide the description of damages, keeping a copy for yourself. Also provide copies of detailed estimates for repairs by contractors you are considering. Be prepared to show damaged items to the adjuster and to give the adjuster sales slips, invoices or cancelled checks from the purchase of the damaged items. Receipts for any necessary temporary repairs also are needed.

Calculating how much you will get. The amount of money you might get from your insurance company depends primarily on the type of policy that you have. Replacement cost policies provide you with whatever is needed to replace damaged items with similar ones of equal quality. Actual cash value policies pay what’s left after deducting depreciation from replacement costs, which can leave very little.

If your home is so damaged that it cannot be repaired, a typical replacement cost policy will pay to replace it within specified limits; an inflation-guard clause will help you keep up with increases in building costs.

Under an extended replacement cost policy, an insurance company will pay 20 percent or more above the specified limits to give your protection against very large cost increases. A guaranteed replacement cost policy pays whatever it costs to rebuild your home – but not to improve on it.

Finding temporary quarters. If your family has to live elsewhere until your home is repaired or replaced, the insurance company will probably pay for your loss of use – reasonable additional living expenses such as rent, eating out, utility installation costs and added transportation costs.

Repairing water damage. Homeowners’ policies don’t cover flood damage, but they do cover other kinds of water damage, such as rain coming through a hole in the roof that resulted from storms or other events. If you have a flood policy and can substantiate flood damage, you need to get actual repair costs for payment.

Getting the money. You usually get two insurance checks when both the house and its contents are damaged. If you have a mortgage, the check for home repairs will be made out to both you and the lender. The lender is likely to put the money into an escrow account, pay for work as it is completed and inspect it before making the final payment.

A final note: If property was destroyed or damaged due to an “unusual” event such as a hurricane, the homeowner might be entitled to an income tax deduction. Details are available in Internal Revenue Service Publication 547, “Casualties, Disasters and Thefts,” available online at www.irs.gov.

This article was produced by the Financial Planning Association and provided by William O. Woody of Stovall Woody Associates.