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You pay your homeowners insurance bill hoping you'll never need it. But what if you do? Filing a homeowners insurance claim is fairly straightforward once you know what to expect. Here's how a homeowners insurance claim works and what to watch out for.
How to Know When You Should File a Homeowners Insurance Claim
Before filing a claim, confirm that your homeowners insurance covers the loss. Standard homeowners insurance generally includes liability, protection from disaster or theft, and additional living expenses (ALE) for living elsewhere while your home is repaired. Most policies cover your home against damage from fire, smoke, wind, hail, lightning and certain types of water damage.
Floods and earthquakes aren't covered by standard policies; you need a separate policy for each. Your policy may also have limits for the personal property it covers such as electronics, jewelry and furs, unless you purchased additional coverage. Review your policy and contact your insurer with any questions.
If the loss is covered, weigh your deductible against the cost of the loss. For example, if roof repairs will cost $1,500 and your deductible is $1,000, it may not be worth filing a claim. Also consider claims you have filed in the recent past. Homeowners insurance is intended to cover major loss, not relatively minor repairs. Filing multiple claims within a few years may cause insurers to raise your rates or cancel your policy.
Steps for Filing a Homeowners Insurance Claim
Filing a homeowners insurance claim typically involves submitting claim forms, providing documentation and working with the insurance company to arrive at a settlement. To file a claim:
- If a crime occurred, contact the police. The police will visit and make a report; this is used in documenting your claim.
- Contact your insurance company. You can usually begin the claims process online or by phone. When natural disasters occur, insurance companies often set up mobile stations in the community to help residents file claims. Your claim will be assigned to a claims adjuster, who will give you a claim number and explain next steps.
- Document the damage. Take photos and videos of any damage. Don't discard damaged items until the claims adjuster approves.
- Make essential repairs. You can take reasonable steps to prevent further damage to your home, such as making emergency repairs to keep out weather and intruders. Photograph damage before fixing it and keep receipts documenting the cost of repairs.
- Obtain estimates. Contact licensed contractors for quotes; insurance companies can use this information to calculate the cost of repairs.
- Keep records. Keep copies of documents you submit to the insurer. Note the name of the insurance representative you spoke with, what they said and what other information you may need later on.
What Happens After You Submit a Homeowners Insurance Claim?
After you file a homeowners insurance claim, a claims adjuster will visit to inspect the damage. They may ask for documentation, such as photos, videos or home inventory lists, to support your claim.
The adjuster may offer you a check for the full settlement (minus your deductible) or an advance on that amount, or you may get your check later. You'll typically receive separate checks for each type of loss—for example, one for structural damage and one for personal property.
If your home is mortgaged, the check may be either made out to you and your lender or go straight to your lender. If your lender is the one who receives the check, contact them to see how payment for repairs will be handled. Lenders may want to approve contractors, deposit the settlement in an escrow account used to pay for repairs, or inspect repairs before issuing a payment.
Sometimes, contractors will ask you to sign a document stating that the insurance company can pay them directly. This may mean you're giving up your entire claim to the contractor. Don't sign anything until you're sure you understand it. Ask your insurance company if you have questions.
If a claim for personal property is approved, you'll receive a check for the current cash value of the items even if the policy covers actual replacement value (the cost of buying new items). When this happens, you'll typically get reimbursed for the difference in cost after you buy new items and submit your receipts to your insurer. Ask the insurer if you need to replace the items within a certain time frame.
What if You Need to Move Out While Your House Is Being Repaired?
If the insurance adjuster determines your home is unlivable, insurance generally covers additional expenses incurred while you're living elsewhere, such as rent, dining out, pet boarding, installing utilities and extra transportation costs.
Living expenses must be "reasonable" given your existing standard of living. If you own a modest home and live by yourself, insurance won't pay for the presidential suite at the Sheraton. By the same token, if you have a sprawling five-bedroom home, don't cram your family of six into a studio apartment. Home repairs can take months or years, so temporary housing should be livable for the long haul.
Be aware that ALE only covers additional costs. If you normally spend $600 a month on groceries but spend $1,000 a month eating out, insurance will pay the $400 difference. Typically, you won't get an advance ALE payment, and will instead be reimbursed later.
Check your homeowners insurance policy to see which expenses are covered and if there are time or dollar amount limits on ALE. Keep receipts to document expenses and submit to the insurer.
What Happens After Your Homeowners Insurance Claim Is Settled?
After your claim is settled, review any shortcomings in your insurance coverage and make changes to ensure you're properly protected going forward.
Depending on your insurance company and claims history, filing a claim could affect your premiums. When setting rates, insurers generally review losses associated with a home within the past five years. If you file multiple claims in that time frame, insurers may view your home as high-risk.