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We buy insurance to protect ourselves from the catastrophic hits that life deals us sometimes. Yet when the worst does happen, as homeowners across the Eastern Seaboard have seen in recent days from Hurricane Irene, you may well find yourself in a fight with your insurance company over whether you'll get the full amount you deserve -- at a time when you can least afford delays and complications.
Fight for your rights
In an ideal world, it'd be easy to figure out what your insurance does and doesn't cover. But one look at a two-inch-thick insurance policy is enough to make your eyes glaze over, much less come up with the answers you need. At the end of the day, it may seem easiest just to trust your insurance company and take whatever you can get.
But that's not always the smartest move. Many homeowners who suffered damage from Hurricane Katrina didn't get the money they expected from their insurers. But after filing lawsuits, many of them eventually received payments from companies including State Farm, Allstate (NYSE: ALL ) , and Nationwide, for much larger amounts than they initially received.
Be smart about your claim
The key to avoiding a fight and getting all the money you deserve quickly is to file a complete claim. Keep written records of conversations you have with your insurance agent or company representatives, collecting names and contact info for everyone you talk to up the chain. That way, not only can you show everything you've done later on if there's a dispute, but you may also be able to ask for and keep working with particularly helpful employees along the way.
Unfortunately, it's tough to provide the best evidence of your losses after they've already happened. The best way to show damage is to have before-and-after pictures of your home and its contents. If you have an inventory of your belongings, that will also help with the process. Also, as you spend money on repairs, be sure to keep your receipts and records of what work you've had done.
Dealing with denial
What should you do if your insurance company turns you down? You may want to talk to a lawyer if that happens. You can typically appeal your claim denial and give your insurance company additional information to reconsider its decision, especially if your insurer's claim denial letter got the facts of what happened wrong, or explains your policy in a way that's different from how your insurance agent or sales rep described your insurance when you first bought the policy.
As unimportant as they may seem in light of the damage that a natural disaster can cause, seemingly minor details can end up making the difference between having a claim approved and receiving nothing. For instance, most insurance policies don't cover flooding, but do cover damage from wind-blown rain. In a hurricane, you'll often have both of those things happening at the same time, so parsing out how much damage came from each cause isn't always cut and dried.
Don't settle for less
The hardest situation you'll find yourself in is if your insurance company grants your claim, but pays you less than you expect. If this happens to you, be careful before you do anything. Even just cashing an insurance check can stop you from arguing about your claim later on.
Many homeowners prefer to try to handle the entire insurance claims process on their own, rather than hiring expensive legal help. But often, insurance companies will respond best when they see you hire an attorney to fight on your side. Insurers know that courts typically interpret any ambiguities or other unclear language in your policy against them, and they also know how the legal language in their policies often differs from how their own agents and representatives describe their coverage. As a result, insurance companies aren't excited about the prospect of going to court. At some point, your insurer may only take you seriously if you have a lawyer next to you.
After a catastrophe, having to waste time fighting with your insurance company adds insult to injury. But if you don't get the fair treatment you deserve, don't hesitate to do what it takes to get all the money you have coming to you.
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Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance. You can follow him on Twitter here.