After the fire, it’s important to first work through the immediate concerns, such as food, clothing and shelter. Once you’ve gotten these priorities met, you can begin to step back and make some bigger decisions about the house and next steps.
It’s important to first off understand how insurance works, so you know what to expect. From there, you’ll be better informed to make decisions on how you’d like to move forward and what your goals are.
Typical Insurance Steps:
After a fire, here are the typical steps that you might expect as you work through insurance:
Claim is filed
Many policies require you to report a fire as soon as is reasonably possible. Of course, safety is the biggest concern. Make sure everyone involved is safe and that the fire department has secured the area and the fire. When it’s reasonably possible, it’s a smart idea to make a call to the insurance company to initiate the claim. Your insurance company can be a big help and have a variety of resources to help you navigate the next steps.
Adjustor comes to house
The insurance company will often send out an adjuster soon after the fire (hopefully within 48 hours) to help assess the damage and begin the claims process. It’s important to initiate the claim as soon as you can, so an adjuster can be sent out to your house as soon as possible.
The adjuster looks to assess the amount of damage to the house, will begin to itemize the damages and will potentially look for the cause of the fire.
Submit “Proof of Loss”
This is one of the most important steps of the insurance process, so pay close attention to making sure you’re completing everything correctly and fully. Each insurance company varies on how this step works. As a rule of thumb, make sure to reference your policy and talk with your insurance company.
In general terms, the insurance provider will be looking to understand what was damaged or destroyed in the house and how much it was worth. The proof of loss is a sworn statement of what you claim to have lost in the fire. The insurance company may ask that you provide photos, receipts, invoices, model numbers, or serial numbers as when you provide the proof of loss.
Discuss the policy type with insurance company
Knowing what type of insurance is very important as you figure out next steps. There are two typical types of insurance policies for homeowners; ‘actual cash value’ and ‘replacement cost’. Both provide a type of coverage, but they are very different types of coverage and will affect your outcomes considerably.
Actual Cash Value
This type of coverage will have lower premiums and lower coverage. In essence, you will be able to receive coverage for the value of the property and possessions, less how much things have depreciated. And remember, depreciation is the lowering of the price you paid because of time, wear and tear. Each insurance company will deprecate the value of things slightly differently.
To give a basic example, if you bought a new dining room table 8 years ago and paid $1,000 for it, that table is not worth $1,000 still. If the insurance company depreciates it over 10 years, which means it’ll be worth $100 less every year. Since you’ve owned if for 8 years, it is now worth $200, and you’d be entitled to $200 for the damaged table.
A policy that covers the replacement cost of the property and possessions is typically a more robust policy. It doesn’t take into account depreciation like the actual cash value policy. Instead, it pays out for the value of something based on what it costs in today’s dollars.
In the same example from before, if you had paid $1,000 for the nice dining room table 8 years ago, and it was damaged, you’d like to have that table replaced. Dining room table prices have increased slightly since you bought your table, and a similar table now costs $1,150. The policy would pay you the full $1,150 to buy a new table.
Negotiate a fair settlement
One of the most important steps in settling your insurance after the fire is the negotiation process. It’s incredibly important to remember that your insurance company is in the business of making money, and they’ll likely prefer to not pay you as much as you might want. Also, the insurance adjustor works for the insurance company, so they might be looking to find ways to pay less money for the claim.
Your insurance company can be a huge help after the fire, but they can also be your enemy as you negotiate your claim.
The insurance company will want to find a quick settlement that might be lower than what you’re entitled to, and they hope you’ll accept it right away. You need to be your own advocate and fight for what you deserve.
You should not feel pressured into making a quick decision to accept a settlement. Take your time, and make sure you account for every expense and part of the claim that you may be entitled to be paid for.
It’s a smart idea to talk to restoration companies and contractors that are familiar with how insurance companies work. They’ll be able to “speak the language” to the insurance company and make sure they can help meet your needs in a way that you are entitled to.
If you can’t negotiate with the insurance company, consider hiring a public adjustor. The adjustor is experienced in matters like this, and will be able to negotiate with the insurance company on your behalf. Of course, you’ll have to pay them, but it may be money well spent.
One More Option: Selling Your House
Did you realize that you don’t actually have to rebuild your old house or move back into the same place? For as bad as a fire may be, there is a chance that it is a blessing in disguise.
If you’ve at all considered moving somewhere else, retiring, building your dream house elsewhere, or can’t stand the thought of moving back into the house because of the emotional toll, you’ve got options!
Most insurance policies allow you to accept money for the property and possessions, that were damaged even if you don’t’ apply that money to fixing up the house. You might be able to take the check that you receive from the settlement, and use that in any way you wish! You could start life all over in a brand new city or state, and have a big check to make that possible!
In addition, you can likely sell your burned house to a real estate investor, who will be able to buy it, even with all the damage and problems. Many ‘normal’ house buyers wouldn’t touch something that is burned, but investors love to buy big projects like this. They can then fix the house up themselves, and ‘flip it’.
You stand to make money from your insurance and by selling your house, and can be out of a housing situation that you don’t want to be in! That’s a win-win!