When filing a homeowner’s insurance  claim, most people want to be sure they get a fair settlement.
By preparing in advance and following your insurance company’s claims process correctly, the majority of homeowners should be adequately compensated for losses arising from insurable perils.
There are, however, some things you need to be aware of which affect the outcome of your claim settlement.
The key factors in determining any homeowner’s insurance claim settlement are the type of policy and limits of coverage purchased.
One of the most common causes of homeowner dissatisfaction with claims settlements tend to be misunderstanding the policy correctly and having the right coverage in place before the need to make a claim occurs.
Insurance Terminology and Replacement vs. Actual Cash Value
In the event your home is damaged beyond repair, most standard homeowner’s insurance policies cover replacement, up to the dollar limit specified. As long as your policy’s limits are increased with inflation to keep up with prevailing local building costs, a loss resulting from insurable perils should result in a claim settlement that is adequate to rebuild your home.
Know whether your policy covers replacement cost or actual cash value:
- Replacement Cost Policy – replaces an item with a like item of the same quality.
- Actual Cash Value Policy – replaces an item minus depreciation.
- Extended Replacement Cost Policy – pays up to a specified percentage (usually 20 to 25 percent) over the limit to rebuild your home, protecting you against sudden rises in construction costs, which can often occur following a large scale natural disaster, but does not allow for more expensive materials than originally used.
- Mobile Home, Stated Amount – mobile homes may be insured with a stated amount policy, meaning the maximum amount is agreed to when the policy is issued, so be sure to update it annually if you want it to cover the full replacement cost.
- Insure Your Home for 100% of the Replacement Cost – if you make significant improvements to your home, disclose this to your insurance company and discuss how to ensure these can be covered.
Limits and Disputes on Homeowner’s Claims Settlements
Should you disagree with how your claim is being handled, contact your insurance company. Stay in communication with your claims person honestly and openly. If you are not getting the information you feel you deserve, ask to speak with a supervisor or manager to discuss your claim.
Remember that substantiating your loss is your responsibility; documenting and backing up your claim with the right figures will help. If you do not agree with the settlement amounts, politely but firmly request them to explain the numbers in detail and point out any errors or discrepancies you feel your documentation supports.
Should you still not agree with the claim settlement, you can proceed to an appraisal process, although you will incur expenses. Both you and your insurance company hire appraisers and a third independent appraiser who acts as a mediator. The decision of any two of the three appraisers will be binding.
Some insurers specify arbitration in their policy provisions, in which case a neutral arbiter reviews both side’s and makes a binding decision; review your policy with regards to your insurance company’s policies around disputes, appraisals and/or arbitration so that you are prepared for the sequence of events in case your claim is rejected or you do not agree with the settlement terms.
Your insurer is allowed up to 45 days to decide on the terms of claims settlements as long as they have provided you with a written notice that explains the reasons for the delay.
If arson is suspected, the insurer is allowed 30 days from the time all paperwork is complete in which to accept or reject your claim. For claims involving natural disaster, the company has 15 additional business days to make a decision.
Finally, if a claims dispute can not be resolved file a written complaint with the Department of Insurance in your state and consult with an attorney familiar with home insurance litigation.
Should your homeowner’s insurance company exceed the legally allotted time limit for settling a claim, it can be held liable for attorney fees and damages equal to 18 % of your claim if you win a court case against the insurer and the company has the burden of proof as to whether it is obligated to make the settlement payment.