You come home from vacation to a basement filled with water thanks to a burst water heater. Or maybe that old oak tree outside your home finally crashed onto your roof. You might even have been the victim of a burglary, with thieves taking all of your computers, TVs and jewelry.
It’s time to file a claim with the provider of your homeowners insurance.
But once you do, what happens next? How does your insurer determine how much money you’ll receive? And how do you decide whether it’s even worth it to file a claim?
There is a bit of science – and some subjectivity, too – behind the decisions that homeowners insurance companies make. Understanding how the claims process works can help you estimate how much you can expect to receive and determine whether filing even makes sense.
Protect yourself before filing a homeowners insurance claim
Bruce Kestenbaum, general manager of Elder Insurance Services in Tampa, Fla., says that it’s important for homeowners to protect themselves and call the proper authorities first before calling their insurance companies.
If the damage to their home has made their residence unsafe, owners should move to a family member’s house, hotel or some other safe place before calling their insurer. If there’s been a burglary, they should call the police department first. And if there’s been a fire, they should, of course, call the fire department first, Kestenbaum says.
“The first thing is to remain calm,” he says. “If it’s an inanimate object that has been damaged, it will get fixed. We don’t want anyone to panic.”
Protect your property after calling your insurer
Homeowners should also, after calling their insurer, take any steps necessary to protect their property from further loss, Kestenbaum says. If your house has been damaged by a fire, you’ll need to rent a storage unit to store any undamaged belongings. You’ll need to arrange to have windows and doors boarded up to protect your home from the weather.
This isn’t just a good idea. It’s a necessity, and probably spelled out in your homeowners insurance policy, Kestenbaum says.
“There is a responsibility of the insured to make sure as best as they can that there is no additional loss that is happening to the property,” Kestenbaum says.
Expect a visit from an adjuster in some cases
Once you call to report a burglary or damage to your home, your insurance company might assign your case to an adjuster, says Jonathan Stein, an attorney in Elk Grove, Calif. This adjuster will ultimately determine how much, if anything, the insurance company will pay you.
To settle larger claims -- such as those resulting from fire damage, water damage or storm damage -- your insurance company will usually send a field adjuster to inspect your property, Stein says. This adjuster will write an estimate for how much it will take to repair the damage your home faces. Once the insurer receives this estimate, it will generally make its payment.
It's important to understand your policy. Some policies will only cover the value of your damaged items at the time of the loss. If your TV was 10 years old, your policy might not provide you much money for it. A decade-old TV isn't worth a lot. Other policies pay out what it will cost to replace your old items with modern ones. Under such policies, you'd receive enough funds to cover the cost of a new TV being sold today, even if your destroyed TV was 10 years old. These "replacement-cost" policies generally come with higher premiums.
Get an estimate for simple claims
Stein says that in simpler claims, such as a fence that blew over during high winds, the insurance company might ask you to provide your own estimate. You can support your claim by asking for an estimate from a contractor, which you can send to the insurer. The insurance company will review your estimate and then pay out what it thinks is fair.
Kestenbaum recommends that homeowners rely on professional contractors for much of this estimation work. Having written estimates from professionals will usually result in higher pay-outs, he says.
“The insurance company wants to settle your claim for as little as possible. You want to get the highest amount possible,” Kestenbaum says. “It’s important to do some work on your own to make sure that what your insurance company is offering is something that you believe is fair.”
Understand the timeline, and speed the process
How long does the claims process take? That depends on the severity of damage. But Brenda Eisenlord, account manager with G&N Insurance in Southborough, Mass., says that a representative from your insurance carrier will usually contact you within one to two business days after you make a claim to either ask for your estimate of the damage or to send out a field adjuster. That adjuster will arrive at your home at the earliest convenient date for you.
You can then speed up the process of actually receiving your money by cooperating with your insurance company and its adjuster. This means answering any questions in a speedy manner.
It helps if homeowners know some basic information about their home -- its age, the quality of materials used during construction, its square footage -- when they file their claims.
Seek recourse if you're not satisfied
If you don’t like your insurance company’s offer, you can take steps to fight it. First, file a written dispute with your insurance company. Make sure to support your argument with written estimates by contractors and receipts documenting how much you paid for destroyed items.
If you still aren’t satisfied after filing a written dispute, your policy might allow you to go into arbitration. During this process, you and your insurance company will make your cases before an impartial arbitrator, usually an attorney. That attorney will then decide how much your insurer should pay. The arbitrator’s decision will be binding.
You can also file a complaint with your state’s insurance commissioner’s office.
Kestenbaum, though, says most claims never get to this point.
“I will tell you, the whole notion of the big, bad insurance company not doing the right thing? That is few and far between,” he says. “In 99 percent of the settled claims, the client is happy.”
Know when and when not to file a homeowners insurance claim
It doesn’t always make financial sense to file a claim. If you have a deductible of $2,000, and your home has suffered $1,000 worth of damage, don’t file a claim. Even though you won’t receive any payment from your insurer – because of your deductible – your insurance company will record your claim. That could result in a jump in your annual premium without you receiving any financial benefit.
Stein says homeowners should think carefully before filing a claim for damages less than $5,000, even if such a claim will surpass the amount of their deductible. That’s because the increase in your premium that comes after filing a fairly minor claim might cost you far more in the long run than will repairing the damage yourself.
If you make too many minor claims, your insurer might even cancel your policy, Stein says.
“Once you get cancelled by your insurance company, it is difficult, if not impossible, to find reasonably priced insurance,” Stein says.