What happens when you are underinsured after the disaster?
The storm(s) have passed. You have waited days, weeks and in some cases months for your final numbers from the insurance company. Only to find out you were under insured and do not have enough to bring your home back to pre-hurricane condition. What next.
Q: I think I’m underinsured. I don’t seem to have enough coverage to replace my home, contents or to cover my temporary living expenses. What should I do?
A: First, recognize that you’re not alone. In recent years, most property owners who suffer large and total losses learn the hard way that they’re not fully insured. Our organization is working hard to solve this problem and help underinsured property and business owners get retroactive policy upgrades. We’re working hard on it now. Many property owners have succeeded in getting the coverage they thought they had but didn’t, but many have given up. Insurers count on you giving up. We hope you won’t. Underinsurance is such a common problem after large scale disasters that The Insurance Coach has has an entire section devoted to the subject. (See “Claim Tips” section, subsection “Underinsurance Help”) But it is a challenging problem and there is no “one size fits all” solution. Documentation, research, strategic negotiation and litigation are your options. The Insurance Coach can hold your hand and walk your through the maze from adjusters to final rebuild. Click here for coaching package
Step 1: Check your policy for obvious errors.
Your insurer may have made mistakes, maybe several of them. This is where you need to learn to understand your loss statement. It could be something as simple as the wrong square footage. If you can establish the error was not your fault, you will have a strong case for increasing your limits to where they should have been. In many cases you will be low balled on your initial claim.
Step 2: Calculate and document your total losses in each major category: (Dwelling, Contents, ALE, Other Structures, and Debris Removal).
If your insurer sold you a “replacement cost” policy, your total losses are what your coverage limits should have been. Make sure you get an independent scope of loss from a licensed and qualified contractor on the total cost of repairing and/or replacing your home with one of like kind and quality, to current building codes. You will probably have to pay to get that independent scope of loss prepared. It’s painful but well worth it. Why? Because you need to establish the real replacement cost of your home and/or repairs. Check out our “Find Help” for public adjusters.
Then get at least two reputable, contractors to price out the job at what they’d actually charge you if you were going to repair your destroyed home exactly as it was. That is the replacement cost amount your insurer/agent should have covered you for. Your independent scope and price estimates should look professional and be in a very detailed format that can be compared side by side with an Xactimate or other type of standard construction cost estimate. Not a time to cut corners.
Step 3: Remember and reconstruct as best you can the history of how your limit were set.
– How often did you speak with your agent/insurer or did you buy your policy online?
– What kind of coverage did you ask for/did he or she say you should have?
– What, if any, specific conversations do you remember?
– How did your insurer/agent explain your coverage (including ads, mailers, orally and in writing)?
– Did you fully cooperate with all requests for information and requests for inspection from your agent/insurance company?
– Did you ever refuse a recommended increase in coverage? – Did you notify your insurer of major improvements or remodeling?
Step 4: If possible, seek out and compare notes with other property owners who are or were underinsured by your same agent and/or insurance company.
If others got your agent or insurance company to retroactively increase their limits, find out what evidence and arguments won the day for them.
Step 5: Make a clear, written demand that your insurance company and/or agent or broker honor the promises that were made to put you back where you were before a loss. Go up the chain of command, and take all steps necessary to enforce that demand.
Let your insurer know that you are underinsured through no fault of your own. Tell them the exact amounts by which you are underinsured. Provide them with the documentation outlined in Step Two, above. If your insurer responds by sending you a written questionnaire with questions that get at how your limits were set, see Step 6.
Step 6: Consult with an experienced policyholder attorney before allowing your insurer to interview you, take your recorded statement, examine you under oath or get you to answer a series of written questions about the history of your policy. This is particularly important if you are underinsured. Your own words can unintentionally harm your chances of getting paid in full. Visit the “Find Help” section of The Insurance Coach website, www.theinsurancecoach.com as a starting point to find the right lawyer.
Getting an insurer to pay more than their contract says they owe you is not easy. But although a contract is a legal written document, there are “invisible” terms that our laws add to them to make sure they’re enforced fairly. Every insurance policy sold in the State of California and most other states, has an invisible clause that the insurance company must act in good faith and deal fairly with you. Insurance companies and their agents cannot deceive or mislead you, and they must live up to promises they made to you.
Step 7: File a complaint with your State Department of Insurance. Keep your complaint simple and general. Don’t go into specifics about your dealings with the agent/broker/insurance company. Identify yourself and the approximate amount of the shortfall.
Should you want to retain The Insurance Coach to help file complaint with your state insurance commissioner click here.
Step 8: Register with FEMA. This should be done right after the storm regardless of whether you have insurance or are uninsured.
You will be guided to file for an SBA loan for up to $200k. Loans $25K and under are uncollateralized. If you do not qualify for an SBA loan due to income and/or credit score you will then qualify to apply for a FEMA grant up to 35K. The Insurance Coach can walk you through the application process for both. Click Here