Getting paid after a disaster
In the aftermath of Southern California’s devastating wildfires, you might be thinking more about your insurance. If your house is damaged or destroyed, what can you expect from your insurance company? How quickly will you be reimbursed? How much will you get, and how can you make the most of it?
Here are some answers:
How do I file a claim?
You can call your agent, who will contact your insurer for you, or you can call the insurer’s toll-free claim line.
You don’t need a copy of your insurance policy with you when you call. With your name and home address, the company (or your agent) can look up your policy and explain your coverages and limits.
During the call, you are likely to be asked a series of questions about what happened to your home and about your current situation. For instance, was the house destroyed or can you live in it? If it was destroyed, where are you living now, and do you need money to tide you over for day-to-day needs such as food, clothing and shelter?
What happens next?
If you had a partial loss but are able to return to your home, you should expect an adjuster -- a representative of the insurance company in the claim process -- to contact you within a few days to schedule an appointment that would take place within a week or two. If your home was destroyed, many insurers attempt to send an adjuster within hours of that first phone call.
What does the adjuster do?
The adjuster is going to want to do two things: Determine your current living situation and get you some money.
Most adjusters are prepared to write you a check on the spot for as much as $5,000 so you can handle your immediate needs, which could include making a deposit on a temporary home.
Major insurers say their goal is to start making payments under all segments of a homeowner’s coverage -- structure, contents and loss of use -- within weeks of receiving a claim.
What’s loss of use?
If your home is destroyed -- or is so damaged that it’s unlivable -- homeowners policies generally pay to put you up in a similar residence for as long as 24 months. Many insurers work with property managers to help customers obtain temporary housing.
If you choose the housing provided by the insurer’s property manager, you probably won’t have to submit your rental costs for reimbursement because the insurer will pay the property manager directly. You also can choose your own temporary housing. As long as it’s reasonably comparable, the insurer will reimburse you for the rent.
If the house isn’t damaged but you were forced to evacuate, does insurance cover the hotel, meal and clothing costs?
Yes. Your insurance will reimburse you for the meals you had to eat out, as well as for the more appropriate clothing you had to buy to replace the bathrobe you threw on when you ran out of the house. If you went to a hotel, rather than a friend’s house or an emergency shelter, your policy covers that too.
In some cases, costs stemming from the loss of the use of your home are covered without a deductible, said Kristine Gillette, property claim manager with Farmers Insurance in Westlake Village. But policies vary on this point, so be sure to check with your insurer.
Also, be sure to keep receipts.
What about reimbursement for all my stuff?
The more detailed you can be about what you lost, the more money you are likely to get. In most cases, policies cover the cost to replace the contents of your home that were lost. The first payment you get, however, is designed to reimburse you only for the current value of your furniture, clothing, electronics and sundry items. In other words, if your television is 5 years old, you’ll get a check for the value of a 5-year-old TV set, not a new one.
Your insurer probably then will give you a list showing each item and the amount you have been reimbursed for it. After you buy a new television comparable to the old one, you’ll submit the receipt and the insurer will pay the difference between the cost of the new TV and what you were reimbursed initially.
I don’t really want to replace my personal property until I have a house to put it in. Is there a time limit on how long I can take to get, say, a new sofa?
Generally, insurers expect you to replace your property within two years of a claim. However, they may extend this deadline if you have a good reason -- such as your house is still being rebuilt.
How am I reimbursed for the home itself?
The insurance company will come up with an estimate of the value of the structure of your home, based on what it already knows about the building materials and what you tell it about the finishing touches, such as whether the home had crown molding, closet organizers, granite counter tops, custom tile and appliances. You probably also should ask a contractor for an estimate to rebuild your home as it was. That way you’ll know whether the insurance company’s figures are realistic.
If you choose to upgrade some aspect of your home when you rebuild, the extra cost is on your own dime. But the insurer should still pay the full cost of replacing what you had previously, minus your deductible.
The insurer will probably make the reimbursement check for the structure payable to you and whoever holds your mortgage (usually a bank). It’s up to you to negotiate with the bank over how you get access to those funds to pay for reconstruction.
What if the contractor has cost overruns?
You generally have two years to go back to the insurer for payment. As long as the cost -- excluding any upgrades -- remains within your policy limits, you should be reimbursed.
When my home was destroyed, I was behind on my mortgage payments and facing likely foreclosure. Does this affect my insurance?
The insurance coverage remains the same. Of course, if your house ends up in foreclosure, the bank will keep the reimbursement for the structure.
However, you might be able to stave off foreclosure by using the initial reimbursement for your home’s contents to catch up on your loan payments. There is a drawback to doing this if it keeps you from ever replacing all of the contents of your home: You won’t get the difference between the depreciated value of the items not replaced and their replacement value. That could be a significant sum.
By the same token, if a temporary financial problem is the reason you are behind on your loan, and you believe that you could get back on your feet by simply getting the mortgage current, this could be an opportunity. After all, you have two years to replace your personal property and still be reimbursed for it.
If I don’t ever replace the property, do I have to return the payments to the insurer?
No. You are being reimbursed for what you lost and are entitled to that money, regardless of what you choose to do with it.
Kathy M. Kristof welcomes your comments but regrets that she cannot respond to every question. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail firstname.lastname@example.org. For past Personal Finance columns, visit latimes.com/kristof.
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Phoning it in
Here are telephone numbers to file claims with some of the largest homeowners insurance companies. A more extensive list of claim-service numbers can be found on the Insurance Information Network website at www.iinc.org.
Allstate: (800) 547-8676
Auto Club: (800) 672-5246
Farmers: (800) HELP-POINT
State Farm: (800) SF-CLAIM
Source: Times research