What happens when you file a homeowners insurance claim?

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What happens when you file a homeowners insurance claim?

Fortunately for readers of this article... I've got some very fresh homeowners claims experience to share. I've spent most of my post college years heavily involved in insurance-- including 5 years as a claims adjuster for Farmers Insurance. But until this year, never had a homeowners claims experience as a customer/policy holder. So what follows are some details from "the other side"...

We had a hail storm in February and our roof was a total loss. My homeowners insurer is Travelers Insurance. I had a fast, pleasant experience with the claims department and we were made whole again in short order by a very conscientious-- and brave-- female insurance adjuster. She made walking on our exceedingly steep, 2-story home look like a stroll down the aisle of Home Depot or Wal Mart.

We have a "Replacement Cost" policy with Travelers. My past claims experience meant I knew to ensure we had nothing less-- but I fear most non-insurance folks don't know exactly what this means. So this is where I'll focus my time as I write this.

Replacement Cost Value (RCV) is what it costs to put everything back like new when you have an insurance claim. Some of you are saying, "Well, duh." But it's not as simple as you think. There's also a phrase with respect to insurance claims that refers to "actual cash value". Actual cash value (ACV) is the cost to make repairs or to replace your property after subtracting depreciation. In other words-- if your roof is 10 years old when it's totaled and it was supposed to last 20 years-- the replacement value of your roof would be reduced by 50%.

With that said... we had an interesting experience on our street. Everyone on the block had a hail damaged roof-- and everyone had a different insurance company. Our neighbors across the street had Farmers Insurance. Having been an adjuster for Farmers myself, I assured my neighbors they would be well cared for. Farmers pays claims and adheres to high standards. They would be fine.

Queue Will Farrell's Stranger than Fiction "...little did he know..." line. Turns out that my neighbor doesn't have replacement cost coverage. Ordinarily, a replacement cost homeowners claim would work like this:

1.) File the claim with the insurance company;
2.) The property claims adjuster visits your home, estimates
      the damage, and cuts you a check on the spot in most
      cases. The check is for the cost of replacement, LESS
      any applicable depreciation, LESS your deductible.
3.) You get the repairs done and submit your final invoice
      from the contractor to your claims adjuster.
4.) At this point, your claims adjuster issues another check
      for the depreciation. You get everything back except
      deductible-- voila-- replacement cost.

My neighbor purchased a plan, apparently, during a time frame when replacement cost wasn't made available. He was pretty mad actually. He was not eligible to recover any depreciation on his claim. In fact, Farmers even depreciated the labor involved in the repairs to his roof. He won't be sticking with Farmers because of this experience and, in fact, he's apt to be sharing his experience with a lot of other potential Farmers customers. Not exactly good PR. I still believe Farmers is a top notch insurer despite this experience. I blame my neighbor's agent for the negative outcome. Not only did she fail to educate my neighbor with regard to what he was purchasing-- or not purchasing-- in this case... but she did not review his coverage annually to make sure he was well cared for. It appears that Farmers made a business decision to cover for ACV only at some point. This appears to be have been a temporary decision since RCV coverage is offered now through endorsement. The second RCV was an available offering, the agent should have called each and every customer to make sure they had opportunity to purchase the better coverage.

So ideally, homeowners claims work out much like I've laid out above in the numbered points. There are nuances and general funkiness that can occur depending on this situation, but for the most part, the big reputable companies will treat you fairly and fulfill the promise of their contract with little hassle.

But "nuances and general funkiness" make good fodder for future articles. So stay tuned... I've got some good stories.

In the meantime, don't hesitate to get some homeowners insurance quotes by entering your state of residence clicking "Quote" above. You should find all top carriers represented on the resulting page and you'll be glad for the due diligence you've performed... and I'll be glad I could help you in your quest for affordable homeowners insurance coverage.