How to deal with natural disasters
By: Tim Sullivan, Club Member
Imagine that your home was ravaged by a hurricane or tornado, that floodwaters from a nearby river poured into your finished basement, or that a giant tree crashed through your roof during an ice storm. You scan the destruction and wonder, "Where do I begin?"
Standing knee-deep in sewage-tainted floodwaters or reeling from a near-death experience compromises your ability to think clearly. It's no time to begin dealing with a natural disaster; no matter how remote the prospect may seem, you should prepare for it now. Understanding the steps and the common pitfalls of disaster response puts you in a much better position to cope in the event of an actual emergency. So grab your insurance policy and start planning.
Process, players and pace
Disaster response is a process with specific stages, timing and players, some less obvious but no less important than others. Here are the basic steps:
1. Report the loss to your insurance carrier and arrange a time to meet with an adjuster, who will inspect the scene and appraise the property damage.
2. Take reasonable measures to prevent additional losses.
3. Document your losses and expenses (structural, personal property, temporary expenses, etc.).
4. Screen contractors and obtain competitive bids.
5. Assist the adjuster with the inspection and appraisal.
6. Evaluate the settlement offer and obtain a partial "actual cash value" payment.
7. Schedule and complete repairs and replace damaged possessions.
8. Submit receipts for additional expenses to draw against the hold-back amount from the settlement.
9. Be prepared to complete and close the claim within the one-year statute of limitations.
Read the policy, right now
Insurance policies vary by carrier and state, so begin preparations today by reading your homeowner's policy - all 15 to 30 pages of it. That includes the addendums at the end that state, "This endorsement changes the policy. Please read it carefully." This will help you to understand what losses are specifically excluded, the payment limits on what is covered and aspects such as deductibles and adjustments for depreciation that can reduce the payout.
Don't be surprised to discover that some scenarios are not covered, and expect to have questions. After all, insurance lawyers write policies and the terms aren't negotiable, so you can assume that the carriers have made every effort to protect themselves. For example, mold has become a huge litigation issue, so many policies impose a ceiling (such as $5,000) on mitigation costs. Most important, familiarize yourself with what the policy specifically expects of you in the event of a claim. To avoid misunderstandings, contact your insurance agent and ask simple "what if" questions to find gaps in your coverage and to learn what deductible or depreciation would apply and whether damages would be capped in certain circumstances.
An insurance policy is a contract. Although passages are subject to different legal interpretations, they should guide your basic expectations. What matters most is not what the contractor quotes in his bid; it's whether the policy says something is covered and what the adjuster's appraisal tool says it is worth. It's better to have realistic expectations now than to discover after a loss that your supposed safety net has some gaping holes. For instance, ordinary homeowner's policies do not cover water damage caused by flooding, surface water or waves, even if water is driven by wind. You need a separate flood-insurance policy for this type of protection. Considering that a quarter of floods occur outside of officially designated high-risk flood plains, many homes lack this protection.
STEP 1: Shout out
After a natural disaster, immediately notify your insurance carrier that you suffered a loss, and let the company know if damages are so severe that you need temporary housing. Most policies will pay for two weeks of reasonably priced temporary housing if you are unable to remain in your home, and they may even pay for boarding your pets.
If you have a mortgage, notify the mortgage holder as well. The company has a stake in restoring the value of the property or, in the event of a total loss, applying the insurance proceeds to the mortgage. So ask about procedures for endorsing insurance checks.
Work with the insurance carrier to schedule an inspection by a qualified adjuster. Request a copy of your insurance policy if you can't find your original documents. Expect your insurer to contact you to arrange an inspection within three business days. To expedite your claim, be sure to provide a mobile or temporary phone number where you can be reached.
STEP 2: Cut your losses (and theirs)
Policy holders are required to take reasonable steps to prevent further losses as soon as it is safely possible. That means securing the building envelope against weather or theft, usually with tarps or plywood. If possible, restore temporary power to run essentials such as heating and refrigeration, and begin removing debris to reduce hazards and allow repairs to begin.
Failing to take the right steps to control losses can jeopardize the amount of your claim. Don't wait until the adjuster arrives; hire professionals to secure your home and to quickly tackle cleanup jobs that are beyond your ability. If you're not accustomed to climbing up on the roof or operating a chain saw, this is a lousy time to learn.
STEP 3: Document everything
After the disaster, you'll need to document your losses with photos and written descriptions and try to salvage old photos and receipts that show what you owned, how much it cost and its age and condition. (To aid in proving losses in the event of a disaster, go through each room of your home today with a camera and take "before" snapshots or video of everything you own, and keep the images in a secure place such as a safety-deposit box). The more evidence you collect, the better. Insurance companies often provide forms that will help you organize your list room by room. Try to include brand names, model numbers, how much you paid and when and where you bought items.
Also be prepared to document your activities and post-disaster expenses by collecting receipts for any money you spend after the loss and by maintaining a journal of meetings, correspondence and calls. The receipts will help you claim the costs, and the journal will demonstrate that you took reasonable care to prevent additional losses and to obtain reasonable prices for goods and services. Be honest and reasonable. If you need to move your family to a hotel for a couple of weeks, don't choose the priciest place in town. Similarly, choose average-price restaurants for family meals.
STEP 4: Be well-adjusted
The insurance adjuster who assesses damages will have three objectives: to develop a list of items that are damaged or lost, to confirm that the losses are a direct result of the natural disaster and to assign a value to those losses after applying appropriate deductibles and depreciation factors based on the terms of your policy. For small claims under $5,000, the insurance company typically will award a check for the full amount. For larger claims, expect to get an initial check for less than half of the total amount to get started. Then you will need to submit actual receipts to be reimbursed for additional expenses up to the full amount of the settlement.
When a natural disaster strikes, people understandably want their homes fully restored in the shortest time and with the lowest out-of-pocket cost. The adjuster's goal is to get the homeowner to accept a final settlement and release of liability as soon as possible and at the lowest cost to the insurance carrier, says Florida attorney Alan Garfinkel (www.askthefirm.com ), who specializes in representing homeowners' associations in insurance claims following natural disasters. Although people may be satisfied with their settlements and the prompt service they receive from their insurance carrier and contractors, many could legitimately do much better if they were better-informed and sought professional counsel, Garfinkel says.
"Your home is your biggest investment, and insurance contracts are complex legal documents. This is not the time to ‘do it yourself,'" he says.
The adjuster will count and measure everything, and a computer software program will assign values. If anything is missed, it will have no value. Although these software tools account for regional cost differences for labor and materials, they're not foolproof: Extraordinary demand following a large natural disaster can boost prices, despite government regulations that outlaw price gouging. Get actual bids as soon as possible to verify that the assigned values are reasonable before you settle. If you have worked with a good contractor, ask him to join you when the adjuster visits for a reality check and to guard against missing less obvious costs.
Here's an example of how you can go wrong: Imagine that after a hailstorm, a large section of shingles is missing from your roof and many of the remaining shingles are damaged. Your insurance company agrees to fund a new roof (minus the $1,000 deductible). Within three days you have chosen a reliable contractor who expects to start the job in two weeks. However, you could wind up with out-of-pocket expenses if you fail to ask the right questions. For example, did the adjuster check the attic to ensure that water didn't get in and soak the insulation? If the lighting and fan motors in ceiling fixtures got wet, could they rust or malfunction later? Did the contractor temporarily protect the exposed roof with a tarp to prevent further damage?
Policies vary from state to state and from carrier to carrier. If a hailstorm destroys your roof, you are entitled to a new one that satisfies current building codes, regardless of the old roof's age. However, you could have trouble collecting payment if you have 30 years of wear on a roof that was warranted for just 25. Unless you have "all risks" coverage for personal property, your policy will deduct depreciation before it puts a price on a 10-year-old couch that was ruined.
Garfinkel says homeowners need to understand the rules. For example, if more than 25 percent of the roof is damaged, in most cases the homeowner is entitled to a whole new roof. (You don't have to settle for a patch with shingles that don't match.) If a skylight breaks and water drenches the room below, you should be entitled to new carpeting, not just carpet cleaning. If mold begins to grow, you have a right to professional mitigation - not just cleaning -- to prevent the fungi's return. If walls are damaged, compensation should include replacing trim moldings, not just hanging new drywall. And painting estimates should include the cost of moving furniture.
If you disagree with an insurance adjuster's appraisal or your insurance carrier's offer, your policy may outline specific remedies. For instance, you can hire your own adjuster and present the two appraisals to an impartial mediator for a nonbinding settlement recommendation. You also can retain legal counsel and file suit against the insurance carrier after satisfying the provisions of the contract.
STEP 5: Dealing with a contractor
When disaster strikes a large area, transient or unlicensed contractors may go door-to-door offering quick response and low prices. But you're better off seeking bids from local contractors who have established reputations. "It's almost never a good idea to hire the contractor who drives down the street after a storm, particularly if he is from out of town." Garfinkel says.
Reputable contractors will have identification, proof of licensing and insurance, a physical address (not just a post office box) and marked trucks. They seldom will demand money before the work begins, and they will be prepared to specify work, materials and warranties in writing. To be safe, contact your local building inspector, building supply company, Better Business Bureau and recent customers for references. Beware of the high-pressure contractor who arrives in an unmarked truck and offers the fastest or cheapest job if you take out the permits and pay for materials in advance. Often the result is poor craftsmanship, substandard materials or incomplete work.
It's common for a contractor to place a mechanic's lien on your home for the amount of the job pending payment. That's fine, but you should obtain a lien waiver for whatever you pay for so a subcontractor or supplier can't place a claim on your property if the general contractor fails to pay him or her. You also can offer to pay the supplier or subcontractor directly.
A proper bid should include the contractor's name, address, phone number, state licensing number and proof of insurance. It should specify the amount and quality of materials to be used and any warranties. In addition, the bid should state that the contractor will obtain permits and schedule appropriate building inspections, and it should spell out payment and estimated start and completion dates.
Try to find out who will be in charge of the job and what, if any, role the person who prepared the bid will play. Also inquire about whether the contractor expects to use your driveway to deliver materials or park a dumpster. A large boom truck delivering roof shingles or a large roll-off trash container can easily crush or crack a residential driveway.
Advice for DIYers
Active do-it-yourselfers may be tempted to do their own post-disaster repairs and keep some of the insurance settlement for themselves. Because the insurance company will only reimburse actual expenses and payments, it only makes sense to do some of the work if the settlement falls short of the actual cost. However, the mortgage holder may specify that the work must be done professionally. This is another case where preparation pays off - examine all possible scenarios before a storm hits so you'll know your rights and your limitations in the aftermath.
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