Understanding a Loss Statement

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What is an Insurance Loss Statement?

An Insurance loss statement is a document or set of documents that assesses the damage done to a structure. If your property is damaged in a natural disaster or fire, a loss statement will provide information on the type of damage done and measurements of the damaged area. 

The objective of a loss statement is to describe all the damage that has been done to a specific property plus the work and costs that will be required to restore the property to its pre-loss condition, including improvements required by current building codes.

Loss Statements differ from a typical housing estimate in the sense that they provide a lot more detail that an estimate. Loss statements include photos and diagrams of the damaged area, along with a detailed estimate for cost of construction. There is not one set format for a loss statement. It may be a binder, a package of documents or a list of items. 

Loss statements ensure that you receive the full insurance claim settlement you deserve. An accurate and complete insurance loss statement will help you to avoid insurance companies ripping you off and paying out less than you are entitled to. 

Describing the Pre-Loss Property

Most insurance companies will prepare an estimate or loss settlement in order to value a loss then determine the eligible payout amount. The more detail you can provide when describing the pre-loss property, the more likely you are to be fairly compensated in the event you make a claim. Your insurance company will send out an adjustor to interview you and make sure your answers are aligned with the loss statement.

The insurance adjustor will ask you questions about your home; like how many bedrooms and bathrooms you had, the dimensions of the home, the interior finishing like flooring and paint etc. Providing detailed answers will ensure you claim is more successful. 

A loss statement should contain as much detail about your pre-loss property as possible. It helps to have proof to back up your loss statement, use any necessary information to accurately describe what your pre-loss home was like. 

The more information you provide about your home, the more policy benefits you will collect, which means you can get your home back to to where it was before the loss. Examples of items that can help you document the pre-loss property:

• Photos of your home’s Pre-Loss Condition

• House Plans and Drawings

• Real Estate Appraisals and Construction Estimates

• Videos of the Interior and Exterior of the home

• Oral descriptions

• Debris and foundation still at the premises

What if I didn’t document anything before my home was damaged or destroyed?

If disaster strikes and you were unaware you needed extra documents to verify your loss statements accuracy, you may not get rightfully compensated. Luckily, there are ways to add supporting documents to your insurance loss statement, even after the damage is done to your home. 

Any contractors or tradespeople that have worked at your home will likely have photos and records of the work they performed. Get in contact with as many of these people you can, ask them for invoices, and any photos or videos they may have to help build your case. 

Another way to getmore documentation is if you recently had your house appraised. Appraisals are an in-depth document that has information and photos about the house, appraisals also give valuations so you will have an estimate on your homes worth. 

When your home was originally built, the city building department would have to have signed off on building plans and permits, contact them and ask if they still have your homes information on file. 

Try and think of anyone else who may have been at your house and taken photos of videos. Ask your family and friends if they have anything that depicts the inside or outside of the home pre-loss. It is perfect if you have used your home to host birthday parties or holiday celebrations. 

All of this documentation will come in handy when making your case to the insurance company. To avoid having to run around and collect a bunch of random documents, spend some time documenting your homes current condition now. This will save you a huge amount of hassle and potentially thousands of dollars when it comes to payout time. 

Why is the Loss Statement so important?

Most settlement offers made by insurance companies are based on a set of documents prepared by their adjustor. The insurance loss statement and any documentation supporting it will dictate the amount you receive in compensation. If you want to be properly reimbursed and get your home back to its pre-loss condition then you will need an in-depth loss statement. 

Because the Loss Statement is so crucial to your insurance case, it is recommended that you hire an independent adjustor to prepare your own loss statement. Once you have this, compare your independent loss statement with your insurance companies and ensure you are being fairly compensated. 

Getting an independent loss statement made allows you to get a complete picture of all the associated costs with repairing your home. 

Should I hire a professional to prepare an independent Loss Statement?

In most cases, yes. Your insurance company will have an adjustor produce their own loss statement, so it’s advised to hire your own. This will ensure you are fairly represented and receive correct compensation.  

It can seem like a hard thing to do, paying someone several thousand dollars to investigate your home after it was destroyed. But getting an independent loss statement is crucial in determining whether or not you get a fair settlement. 

Who prepares an independent Loss Statement?

There are a wide variety of professionals that can prepare an independent loss statement. These people can include licensed contractors, architects, construction professional, and estimators. The level of detail and price of the loss statement will vary depending on whom you hire. 

A professional estimator is likely to give a more comprehensive report than a construction professional, mainly because the estimators primary business is in cost documentation. This also means that an estimator is likely to cost more than a construction professional. 

How do I hire a professional to prepare an Insurance Loss Statement?

It’s important to hire the right estimator to prepare your loss statement, as they are responsible for you being fairly compensated. Take your time when deciding on an estimator, interview as many as you need to until you feel comfortable choosing one. Use the questions below when hiring someone to perform a loss statement.  

If your loss occurred in a natural disaster, communicate with other impacted property owners in your community about which professional(s) they are using for this service.

Questions to ask before hiring anyone to prepare an independent scope of loss:

1. Have you previously prepared an independent loss statement?

2. If so, how many?

3. When did you prepare these independent loss statements?

4. Are you familiar with local construction costs and building codes in my area? How so?

5. Have you ever had to “defend” your work in court? If so, what was the result?

6. What is the price for an independent loss statement and what is included? 

7. Ask for references and call the references.

8. Clarify the work to be performed for the loss statement and fee(s) charged:

a. Does the work include responding to insurance company questions regarding the estimate?

b. If not, how much does the preparer charge to respond to insurance company questions?

c. Is the preparer willing to meet with you and the insurance company adjuster to “defend” his scope against the insurance company’s scope?

9. If the person holds a contractor’s license, check the license status with the Contractors State Licensing Board.

Can I rebuild a different home than the one that was destroyed?

Your insurance company is only obliged to replace what you had. However, it is extremely difficult to replace your destroyed house with an identical house. Realistically, you will be able to make some changes to the new house, but problems may arise with your insurance provider if you try to negotiate for a larger home or more features. 

If you want to build something different to your pre-loss home, it is better to come to agreement with your insurance provider about how much it costs to replace your home before discussing any changes. 

Summary

Every insurance company will have different processes when it comes to valuating a loss. If insurance providers are undertaking their own loss statement process, it is advised you hire your own independent estimator. This will ensure you get an unbiased judgment on what it will cost to repair or rebuild your home. 

In the unfortunate event that you have to make a claim, remember your goal is to completely cover and cost of replacement or repair. If your insurance company is not preparing a loss statement, ask them how they intend to value the loss to your home.

To ensure you get compensated, perform a thorough documentation process of the current condition of your home. Having a loss statement organized that specifies that specifies the materials, labor, quantities, and qualities needed to get your home to pre-loss condition gives you a basis for a fair settlement.

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