In your typical home improvement project, things move along pretty quickly. The homeowner and the contractor meet to discuss the project, agree on a scope of work and a price, and set a start date. Permits are pulled, materials are ordered, and work commences. The homeowner pays a percentage up front, to cover materials, and makes progress payments until the work has been completed.
When disaster strikes – a tree falling on the house, a flood, a fire, etc. – this process can get complicated in a hurry:
- The homeowner contacts their insurance agent, who files a claim on their behalf, and sends out an adjuster to view the damage and write an initial scope of work. If this is a major storm event, it may take several days or weeks for an adjuster to reach you. Add another week to this for the adjuster to complete their written scope of work and estimate for repairs.
- The insurance adjuster completes an initial rough estimate. The purpose of this estimate is, chiefly, to get an initial check into the client’s hands quickly. (Neither the insurance company, the adjuster, nor the contractor expect the adjuster’s initial rough estimate to cover the actual cost of the complete repairs.) Next, the contractor reviews the adjuster’s estimate, to understand the scope of the work for which the insurance company is willing to pay. The contractor then amends the adjuster’s estimate with his own scope of work and estimate of the cost of the actual repairs. If the adjuster is working multiple claims in a disaster situation, this process may take several days.
- Once the scope of work and the price have been agreed upon by all parties, the insurance company writes the check. Depending on the dollar amount of the loss, homeowners may be surprised to find that the check is made out to them AND to their mortgage company. In this case, the payments to the contractor may only be released at the discretion of the mortgage lender, who may call for inspections at certain phases of the work. These inspections are in addition to the ones required by the city or county where you live, and they may cause the work to stop until a particular phase is approved.
- The contractor will apply for permits from the city or county. Each locale has their own rules and regulations, so the permitting process can take a few days or a few weeks.
- The homeowner requests the contractor’s deposit amount from the mortgage lender. The check usually arrives in 5-7 business days. (Get used to this process. It will be repeated every other week as the contractor bills for progress payments.)
- Materials are ordered and work commences.
As you can see, the average remodeling job is very streamlined, compared to the disaster repair. It’s easy to get frustrated with the process and the delays. Keeping the lines of communication open with your agent, adjuster, and contractor will help with this. Understanding the reasons for potential delays will give you a realistic expectation of the timeline for the repairs.
Some helpful tips:
- Choose a local contractor who is properly licensed and insured. In a major storm event, you are likely to be approached by someone who promises to get started immediately, if you give them a big up-front payment. While these “storm chasers” may be qualified to do the work, they are usually from out of state and won’t be around later, should you need to address any issues with their repairs.
- Ask your contractor whether he is familiar with Xactimate. This is the program most adjusters use to determine the scope of work and budget for your repair. If your contractor “speaks the same language” as the adjuster, negotiations on your behalf will go much more smoothly.
- Open a separate bank account for the insurance proceeds, and pay all damage-related expenses from this account only. This will help you keep track of what’s been received, and what’s been spent. You may need to account for this money on your tax return, so having all your expenses in one place will help.
- Know what your insurance policy covers (and what it doesn’t). Check in with your agent annually to ensure you have enough coverage, especially if the value of your house has increased. Ask about flood insurance, whether you live in a flood zone or not. Consider adding riders to your existing policy for big ticket items like electronics and jewelry, which may not be covered under a basic homeowner’s policy. Take a photo or video inventory of each room periodically, and keep it in a safe place.
Choosing the right contractor and understanding your insurance policy, before you need to file a claim, can provide you with peace of mind during a very stressful time.