Home Insurance 101: How Claims Work For Structure, Personal Belongings

Filing a home insurance claim is something that your customers will hope they never have to do. After all, they buy a house looking at it as a safe haven — an impenetrable place where they can come home and escape the pressures of the outside world. But inevitably in the life of of a home, things will arise that require action, and getting them through the process is a lot easier if you can help them understand how claims work. Generally, there are two key areas that may need to be addressed when filing a home insurance claim, the Insurance Information Institute (I.I.I.) notes — structural claims and personal belongings claims.

Before we get to that, though, here are some general things to share with customers about the overall process.

First, an adjuster will inspect damages and offer a certain amount of money for repairs. This check is not considered the final payment, but an advance against the total settlement amount. With an on-the-spot settlement, I.I.I. points out, one can “accept the check right away” and then “reopen the claim and file for an additional amount” generally within one year of the date of the disaster. This hinges on state insurance department regulations, but is generally true because it gives one a chance to catch related damages that may have initially gone overlooked.

If both structure and personal belongings are subjected to damage, the insurance company usually provides the claimant with two separate checks, one for each category, and there may also be a third check involved for additional living expenses should any be incurred during renovation/rebuilding.


On Structure

Checks for structural damages are typically made out to both the home insurance customer and the mortgage lender. As I.I.I. notes, the lender “gets equal rights to the insurance check to ensure that the necessary repairs are made to the property in which it has a significant financial interest.”

In other words, the mortgage company or bank will have to endorse the check.

“Lenders generally put the money in an escrow account and pay for the repairs as the work is completed,” the I.I.I. states, adding that a claimant should show the mortgage lender a contractor’s bid “and let the lender know how much the contractor wants up front to start the job.” Mortgage companies may also wish to inspect the final work before endorsing payment to the contractor.


On Personal Belongings

For this aspect of a home insurance claim, the I.I.I. recommends adding up the cost of everything inside the home that has been damaged in the disaster, adding that now is the time to review personal inventory, to help recall possible overlooked losses.

If one doesn’t keep an inventory, they should “look for photographs or videotapes that picture the damaged areas” and contact the bank or credit card company for proofs of purchase.

When making a list, “don’t forget items that may be damaged in out of the way places such as the attic or tops of closets,” the Institute adds.

Replacement cost policies reimburse for the cost of buying new items, while actual cash value policies reimburse for the cost of the items minus depreciation. The first check will be calculated on an actual cash value basis regardless of what the policy is, with the difference being made up later.

In Summary

Home insurance claims may take a little time and coordination, but as long as your customers are aware of the steps in the process and what to expect regarding payment, you can help them maintain their patience and peace of mind throughout.