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Winter 2018  Volume 14, Number 4        

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What Happens if I have a Homeowners Claim?

After a disaster, you want to get back to normal as soon as possible, and your insurance company wants that too!

You may get multiple checks from your insurer as you make temporary repairs, permanent repairs and replace damaged belongings. Here's what you need to know about claims payments.

The Initial Payment Isn't Final

In most instances, an adjuster will inspect the damage to your home and offer you a certain sum of money for repairs, based on the terms and limits of your homeowners policy. The first check you get from your insurance company is often an advance against the total settlement amount, not the final payment.

If you're offered an on-the-spot settlement, you can accept the check right away. Later, if you find other damage, you can reopen the claim and file for an additional amount.

You May Receive Multiple Checks

When both the structure of your home and your personal belongings are damaged, you generally receive two separate checks from your insurance company, one for each category of damage. If your home is uninhabitable, you'll also receive a check for the additional living expenses (ALE) you incur if you can't live in your home while it is being repaired.

Your lender or management company might have control over your payment.

If you have a mortgage on your house, the check for repairs will generally be made out to both you and the mortgage lender. When you get a mortgage the lender usually requires to be named in the homeowners policy and that it is a party to any insurance payments related to the structure. Similarly, if you live in a co-op or condominium, your management company may have required that the building's financial entity be named as a co-insured.

This is so the lender (and/or, in the case of a co-op or condo, the overall building), who has a financial interest in your property, can ensure that the necessary repairs are made.

When a financial backer is a co-insured, they will have to endorse the claims payment check before you can cash it.

If your home has been destroyed, the amount of the settlement and who gets it is determined by your policy type, its specific limits and the terms of your mortgage. For example, part of the insurance proceeds may be used to pay off the balance due on the mortgage. How the remaining proceeds are spent depends on your decision whether to rebuild on the same lot, in a different location or not rebuild at all. Though these decisions may be affected by state law.

Your Insurance Company May Pay Your Contractor Directly

Some contractors may ask you to sign a "direction to pay" form that allows your insurance company to pay the firm directly. Read it carefully to be sure you don't assign your entire claim over to the contractor. When in doubt, call your agent before signing.

When work is completed, make certain it's been done to your satisfaction before you let your insurer make the final payment to the contractor.

Your ALE Check Should Be Made out to You

Your check for additional living expenses (ALE) has nothing to do with repairs to your home. So, make sure this check is made out to you alone and not your lender. The ALE check covers your expenses for hotels, car rental, meals out and other expenses you may incur while your home is being fixed.

Your Personal Belongings Valuation will be Calculated on Cash Value

You'll have to submit a list of your damaged belongings to your insurance company (having a home inventory on hand will make this a lot easier). Even if you have a replacement value policy, the first check you receive from your insurer will be based on the cash value of the items, which is the depreciated amount based on the age of the item. Once you have determined the exact replacement cost and actually replaced your items, you will get the difference. If you decide not to replace an item, you will get only actual cash value (depreciated) amount for it.

You'll generally have several months from the date of the cash value payment to purchase replacements.

In the case of a total loss, where the entire house and its contents are damaged beyond repair, insurers generally pay the policy limits, according to the laws in your state. That means you can receive a check for what the home and contents were insured for at the time of the disaster.

Be assured that If you have a homeowners claim, we are always available to help make things run smoothly for you.

Our thanks to the Insurance Information Institute.

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In this issue:

This Just In...

What Do You Mean That's Not Covered?

What Happens if I have a Homeowners Claim?

Insuring Motorcycles…and their Drivers

Alternatives to Insurance for Home Electrical and Mechanical Systems Losses



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