The Cold Reality of Insurance Claims

Maybe your roof has sprung a leak or your broiler has called it quits. Learn how to keep the aggravations from becoming personal crises.

By Leslie Jay

Maybe your roof has sprung a leak after a week of heavy rains. Or your boiler has called it quits before the heating season is over. Sooner or later, as every homeowner discovers, something goes wrong, and usually at the most inconvenient moments. To keep these aggravating problems from becoming personal and financial crises, take a deep breath — and follow a few simple guidelines.

Begin by reporting the condition. If your home has been vandalized or burglarized, you need to contact the police, who will fill out a docket on your case. (Ask the officers for their names; this information may help you get a complete record from your precinct.) Otherwise, your first call should be to your insurance agent. Insurers generally require claims to be filed within a specific time period after the event, so you need to act promptly. It's useful to have your policy in hand when you pick up the phone, but even if you can't find all your papers, go ahead and call anyway to initiate the process. Your insurer will probably arrange for a claims adjuster to come to your home; if no one tries to schedule an appointment with you, request a visit yourself.
Next, you should document your claim. "Make lists," suggests Jeanne Salvatore, vice president of consumer affairs at the Insurance Information Institute in New York City. "Take photos. If you don't have a camera, you can borrow one or buy a disposable. It's also effective to use a movie camera and walk through the house making a videotape." Homeowners who maintain updated inventory lists — always a good idea! — should check to see what items are missing or broken. Back up the claim with original receipts.

Meanwhile, you should take reasonable steps to prevent further damage, says Salvatore. Drape vulnerable roof areas with heavy-duty plastic; have a plumber patch the boiler, if possible, so pipes won't freeze and burst; board up broken windows. Insurance will not pay for routine maintenance, but it will pay for the cost of additional repairs to prevent further damage by an insured catastrophe. "Reasonable" is the operative term. Resist the temptation to do a total cleanup before your property has been inspected. The claims adjuster needs to see the wreckage, such as shattered dishes or ruined carpets, to give you your money's worth.

Now you're ready to get estimates for repairs. With temporary fixes in place, you'll have a better choice of contractors, instead of being limited to the first one who answers the phone. Ask friends and neighbors for referrals, contact national trade organizations, or call reputable franchises. Construction professionals agree that price is not the most important factor; a low-ball quote often means low-grade results. "Quality, service, price — you can get two out of three," observes Doug Dwyer, chairman of the national membership council of the National Association of the Remodeling Industry.

Once you and your insurer agree on a figure, you should receive a check pretty quickly. That's the good news. The bad news? The settlement you get, minus any deductible, may not cover your bill in its entirety, particularly if you have to rebuild in accordance with the latest building codes. Before you pay extra costs out of pocket, consult your accountant; borrowers may be able to deduct some of their debt fees and credit interests from their taxes.

Standard financing options include home equity loans and home equity lines of credit. Make sure you understand the terms of these loans, because they use your house as collateral. The one thing you don't want to do is accept financing from a contractor who is tackling your project. If you find his or her work unsatisfactory, you'll have difficulty withholding payment.

New York-based Leslie Jay's work has appeared in Health, Fitness, and Martha Stewart Living.