When your home suffers damage from a natural disaster, it’s often just the beginning of an uphill battle. Even homeowners covered by natural disaster insurance should prepare for a long and costly recovery process. More than 60% of U.S. homeowners are underinsured. And with the seemingly endless stream of recent natural disasters, many people may not have enough funds to rebuild after an act of God.
How can you protect yourself in the wake of a natural disaster? Reviewing your insurance policy is a good start, but understanding how your insurance provider will handle your claim is essential. Here’s a roundup of the most important things to know about natural disaster insurance claims.
1. Timing is everything
Finding time to call your insurance provider can be difficult during a natural disaster. What’s more, you may not know who to call.
But when it comes to filing a claim, speed is important. “Insurers handle claims on a first-come, first-served basis,” said Robert Hunter, the Consumer Federation of America’s director of insurance, earlier this year. You’ll want to reach out to your agent and report damage as soon as you’re safe.
Since insurance companies often dispatch special units to handle large-scale disasters, ask if there is a catastrophe claim number for your region. Including it in all communication may help expedite your payout. It’s also best to have your policy information available electronically so you can review pertinent information when needed.
2. Assessing your home’s damage could take weeks
Police often block off certain areas during and after a catastrophe. Floodwaters, downed power lines or mandatory evacuations may prevent your insurance adjuster from reaching your home as quickly as you’d like. Depending on where you live and the severity of the disaster, it could take several days or even weeks before your claim can be evaluated.
While waiting to process your insurance claim isn’t ideal, it may be your only option. Thousands of people may be also filing claims. Be patient and realize that repeatedly calling your insurer may not do you any good.
3. Your policy may not estimate replacement costs realistically
Insurance companies do not always calculate rebuilding costs accurately. If you haven’t updated your policy after renovating your property or kept a list of your home’s inventory, you likely won’t receive the coverage necessary to replace everything. Plus, due to an influx of homeowners rebuilding at the same time, recovery expenses tend to increase in a region affected by a natural disaster. These increased costs for labor and building materials usually aren’t factored into coverage, leaving the policyholder to cover the rest. Luckily for those insured by Hippo, we calculate risk differently and base figures on the real market value of materials.
An extended replacement cost policy might come into play here, which increases a policy by a certain percentage (usually 25% or 50%).
That means customers can rebuild if costs are higher than originally expected. Most major providers don’t include this as a standard offering, but it’s worth checking your policy’s fine print to find out if you have it.
It’s also important to note that you can appeal your insurance provider’s first offer if you aren’t satisfied. You can take it up with the company yourself or with the help of state agencies. Just beware that using any funds from your insurer may release them from further liability.
4. Using your insurer’s approved contractor isn’t mandatory
Your insurer will send a list of contractors to complete any work they cover. It’s often wise to work with the professionals they provide, but you have the option of shopping around and hiring your own workers.
Just beware that you run the risk of working with someone who may drive up the cost of repairs. After a disaster, fraudulent contractors often prey on uninformed victims to turn a quick profit. Calling references and looking up Better Business Bureau reviews will help protect you from scams.
5. Additional living expense coverage can be helpful
Once you run out of insurance to cover your living expenses, additional living expense coverage could make the difference between whether you live out of your car or live comfortably.
Reconstructing a home can take time following a natural disaster. This amount provides reimbursement for hotel stays, temporary home rent and incidentals while you’re displaced. Obviously, even additional coverage won’t last forever. That could mean extensive out-of-pocket expenses for victims of disasters like the recent Napa and Sonoma wildfires, where timely rebuilding seems unlikely due to the size of the affected area and construction labor shortage.
Honorable Mention: Your claim money won’t necessarily go to you
Insurance companies issue payments to anyone who has financial interest in your property. That may include a spouse, partner, guarantor and mortgage provider. You won’t be able to cash the check without the signature of everyone involved. If the check comes to you, you’ll have to endorse the check and send it to the other parties. If it goes to a bank or mortgage company, they become responsible for sending the money to you.
We know it may not be exciting but it’s important to stay educated about homeowners and natural disaster insurance, whether you’re filing a claim or buying your first house. What you don’t know could put you at risk and you don’t want to be unprepared when a catastrophe strikes.
