6 Tips to Avoid Losing an Insurance Claim

Most people in Texas purchase insurance to allow them to restore their property if it is damaged or lost. Unfortunately, when disaster strikes, many people receive paltry amounts for their damaged or destroyed property from their insurance company when they file a claim.

Obtaining a good settlement from your insurance provider begins before disaster strikes, and planning ahead can make your settlement faster and easier. Oftentimes, it can help maximize the amount paid for your loss. More importantly, understanding your policy helps you understand exactly what type of coverage you purchased, and your responsibilities under the policy such as mitigating damage if your property is lost or damaged.

To avoid losing an insurance claim in the event of property damage, follow these six easy tips:

1. Save your receipts.

Whenever you purchase something valuable, always save the receipt in a safe, secure location. Digital copies are okay, but store a copy of them offsite and/or in the cloud. Store all your paper receipts in a fireproof safe; that way, you’ll still have them in case of a house fire. Otherwise, without a receipt, it might be hard to prove the loss when you file a claim. Receipts also help the adjuster assess the value of the destroyed property.

2. Create a detailed home inventory.

Sadly, the National Association of Insurance Commissioners indicates that only half of all homeowners create inventories of their possessions. Creating a detailed inventory of your valuables makes it easier to file a claim. Your inventory should include details such as serial numbers, date of purchase, and the original price. If you have had something appraised by a professional, be sure to include the appraisal in your inventory. Be sure to include the name of your insurance company, policy number, and contact information with your inventory.

3. Video your home.

A detailed home inventory is critical if you need to file a claim because it helps establish the cost basis of your possessions, and a video tour of your home documents items you forgot to include in your detailed inventory. Videos are a great way to document items you don’t have receipts for, and are priceless if you need to file a claim. Be sure to save a copy of the video offsite in a secure location.

4. Know your homeowner’s policy.

Arguably, this is the most important thing you can do. Simply put, if you don’t fully understand your policy, you may have already lost your claim, even with a perfect home inventory. Why? Many homeowner’s policies limit the amount of coverage provided for certain possessions, especially for items like jewelry and art. Even if you trust your insurance agent, you need to carefully examine your policy to understand your coverage limits. Depending on your circumstances, you might need to purchase extra endorsements to ensure coverage for specific categories such as jewelry. Additionally, you might need a specialized policy to provide extra coverage for the loss of valuable items such as coin collections.

Typically, depending on your policy, you may only be entitled to reimbursement for either “replacement cost” (the cost to buy a new item) or “actual cash value” (what the item is currently worth). For example, if you file a claim that includes a 2-year-old television on an “actual cash value” policy, the insurer may only pay 40% of the original cost. Understanding the intricacies of your policy is essential to avoid unpleasant surprises if you ever need to file a claim.

Lastly, consider purchasing flood coverage from the National Flood Insurance Program, if you live anywhere flooding is even a remote possibility, because many standard homeowner’s policies do not cover flood damage. Your insurance agent should be able to write a flood policy, but it takes 30 days to become effective. Don’t wait until the river is rising to buy flood insurance.

5. If you sustain property damage, you should:

  • Immediately report property damage to your insurance agent and company.
  • Keep receipts for any repairs so that your insurance company can reimburse you.
  • Make emergency repairs to protect property from further damage.
  • Document the damage and repairs with receipts and photos.
  • Do not dispose of damaged or destroyed property during initial cleanup.
  • Beware of unreliable repair businesses and only hire licensed and reputable contractors.

If you are considering using a public insurance adjuster, verify that they are licensed with the Texas Department of Insurance. Be sure you understand how much a public insurance adjuster is charging, and what services are included before signing any contract.

6. Be patient when settling.

It’s natural to want to settle – get the check – as fast as possible after a property loss, but speed is not necessarily your best friend in these situations. If your insurance company wants to quickly hand over a check, be careful; cashing that check may mean that you’re forfeiting your right to collect what you’re truly owed.

The consumer advocacy group, United Policyholders, advises all policyholders to carefully examine any check, letter, or other correspondence from your insurer. Look for language that suggests you’re accepting the settlement in full. If you don’t understand anything in the correspondence, consider having an attorney review the documents with you or help you negotiate a fair settlement with your insurance company.

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