5 Things You Probably Didn’t Know (But Should Know) About Your Homeowner’s Insurance

1. Coverage for Tort Claims – Many policies automatically include coverage for you or a family member who resides in the same household for tort claims filed against you.  Make sure to check your policy if you find yourself in this unfortunate position.

2. “Replacement Value” isn’t Paid Until You Replace the Item – Most polices won’t pay you “replacement value” until you actually replace the item.  What they pay you is the “actual value” (“fair market value” minus depreciation).  Then, and only then, if you replace the item, they will pay you the remainder.  Here is an example of why this is unfair:

Assume your house burns down and everything in it is destroyed (“complete loss”).  The insurance adjuster comes out and determines the “actual case value” of everything in the house.  The adjuster determines that your refrigerator’s “actual cash value” (factoring in depreciation for age, condition, etc.) is $200, but the cost to replace it (“replacement value”) is $800.   He then hands you a check for $200 and tells you that you need to come up with the remaining $600 and go buy the refrigerator before he will write you another check for the same $600.  He then proceeds to go through all your destroyed possessions and do the same thing.  By the time he’s done, he’s written you a check for $25,000 for $150,000 worth of destroyed items leaving you to figure out a way to pay the rest before he kicks in the rest.

Keep in mind that you are paying a higher premium for a “replacement cost” policy.  So why do insurance companies do this? Because they know most people won’t replace the item because they can’t afford to.  Why can’t they afford to?  Because the insurance company won’t pay them the “replacement cost” up front, leaving you holding the bag.

And no, I’m not making this stuff up.

3. Don’t Trust Your Adjuster’s “Depreciation” Analysis – This is where insurance companies really hammer you.  Whenever you have a loss, adjusters come in an depreciate everything in your house, including your actual house (structure).  They use their own internal depreciation schedules to come up with these values (see #3 above). DO NOT TRUST THEIR DEPRECIATION DETERMINATION. Challenge the adjuster on these schedules.  Demand to see the depreciation schedule he/she used FOR EACH ITEM HE/SHE DEPRECIATED.  And, don’t let the adjuster tell you that he’s not allowed to send you the schedules – because thats crap.  You are entitled to see the schedule and know exactly how much each item is being depreciated.

We recently represented a couple from Florida who had a vacation home here in Georgia. Their Georgia home burned down and was a complete loss.  The adjuster initially tried to tell me that their home and possessions were worth only $60,000 factoring in depreciation.  After jumping through six months of hoops, the insurance company finally relented and paid $140,000 for the loss.  If they will do it to me, they will do it to you.

4. In the Event of a Loss, Read your Policy Closely – I can’t stress this one enough.  The first thing you need to do after a loss is get a copy your policy and go over it with a fine tooth comb. One of the main ways insurance companies avoid paying you for your loss is by claiming you “failed to cooperate” or failed to provide the required notice.  I would highly recommend immediately taking your policy to a lawyer who handles these types of cases for review.  This is not a time to figure it out on your own.

Almost every policy requires that you provide written notice of the loss within a certain time period (typically 30 days) after the loss.  This notice is normally required to be sent on a specific form, sent to a specific address, and itemizing the items destroyed to include estimated values. Don’t send it on the right form – claim denied.  Don’t provided all the required information – claim denied.  Send it a day late – claim denied. Remember, insurance companies don’t make money paying claims.  Give them a reason, and they will deny your claim.

Once you provided the required written notice, then be prepared for the dog and pony show. You may be required to: itemize everything in your home, provide the date every item was purchased, provide the amount paid for every item, provide the condition of every item, give a recorded statement the adjuster or their lawyer, tell them whether or not you have ever had a claim on any other policy, give them financial information (bank statements, credit card statements, etc.), as well as a host of other information.  God forbid the adjuster “suspects” foul play, as the list of hoops you will have to jump through will grow exponentially.  And, if you don’t do everything they require, claim denied for “failure to cooperate.”

5. Insurance Companies Routinely Increase the Value of Your Home, Increasing Your Premiums – Keep an eye on this.  Because home value fluctuate, and because your premium is largely based on the value of your home, monitor the value the insurance company places on your home. Make sure it coincides with the actual value of your home based upon the market.  It it doesn’t, let the insurance company know and demand a correction.

Let me know if you have any questions about your policy. I’m happy to review it free of charge and point out the important areas you need to be mindful of.  While most polices have similar standard language, all policies will differ to some degree. Similarly, not all insurance companies are created equally. Some are especially more problematic than others.

Nathan T. Williams





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