Losing a home to a fire or a storm can be a traumatic experience for any homeowner. It can be made even worse if your insurance claims payments are lower than you expected.
Claims settlement amounts are largely determined when you purchase your home insurance policy, and then every year at renewal time when coverage limits and deductibles are updated. You can find your coverage limits listed on your policy's declarations page. It should show limits and any applicable deductibles for the three most common types of insurance coverage: building or structure, contents, and additional living expenses.
When you have a claim, insurance companies will send out adjusters to evaluate the damage to both the building and the contents of the home.
For example, say you have a fire at your home. The insurance company adjuster will look at the smoke and flame damage caused by the fire, and also at the water damage resulting from the fire department's efforts to put the flames out.
Your dwelling coverage should be based on the cost to rebuild the house (materials and labor), not its real estate market value. Your agent should be able to help you identify an accurate reconstruction amount at the time you purchase or renew your policy.
The insurance adjuster will review each damaged item separately, and then arrive at a complete renovation or rebuilding estimate in order to put the house exactly the way it was before the damage occurred.
Older homes may need to be updated according to new local building codes, depending on the extent of repairs. These code upgrades will increase the cost of returning the home to normal, and that cost might not be covered by a home insurance policy.
Stephen T. Surace, vice president of Utica, N.Y.-based Adjusters International, points to Florida as an example. After hurricanes, homeowners who didn't previously have hurricane shutters found they needed to install them in order to meet building codes. Some had to absorb the cost themselves because their homeowners insurance policies didn't cover code upgrades.
If your homeowners insurance policy doesn't include building-code upgrades, you can add "law and ordinance" coverage. Read more about insurance coverage for code upgrades.
And remember that homeowners policies don't cover every natural disaster. Earthquakes and floods are not covered. In some parts of the country, windstorms are not covered. You can buy special policies for these events.
Your claims settlement for your belongings might be handled by a different insurance adjuster. Here, too, your settlement check will hinge on the coverage decisions you made. If you purchased only cash value coverage, you'll be reimbursed for the depreciated value of your belongings. So, if your couch was five years old, you'll be reimbursed for a couch of that age.
A better bet is replacement cost coverage. This provides reimbursement for buying new, similar items.
Contents coverage is generally set as a percentage of your dwelling coverage, such as 50 percent. If your house is insured for $200,000, for example, your belongings might be covered for up to $100,000. Check your policy for your own limits. You can add additional contents coverage if this is not enough. You can also add coverage for specific expensive items, such as jewelry, that aren't fully covered under your homeowners insurance policy.
The insurance adjuster will inspect the home's damaged contents -- such as furniture, clothing, and decorations -- and request an inventory of the family's possessions from the homeowner. They then decide whether these items can be cleaned or repaired, or if they need to be replaced.
Additional living expenses
The last factor that insurance companies will look at is additional living expenses. These are the extra costs you incur as a result of not being able to stay in your home while repairs are being made, such as hotel bills. This coverage is often set at 15 percent of your dwelling coverage. So if your dwelling is insured for $200,000, your limit for additional living expenses would likely be $30,000.
"Maybe you're farther away from your job and you have to drive 15 miles extra to work every day. They should compensate you for those additional miles," says Surace. "These are things that you need to make sure you're paying attention to so that you can submit them with your claim."
Insurance help for claims
Hiring a public insurance adjuster as soon as the fire or storm has passed can be invaluable when you have a large loss. These professionals know how to handle the labor-intensive paperwork involved in a large insurance claim, such as creating inventories of a home's contents, and challenging the insurance company on issues such as cleaning a smoky carpet instead of replacing it with a new one. According to Surace:
Every loss is different, every home is different and every policy is different, so it makes sense to have a professional on your side. Public adjusters can go through and adequately document your loss and submit that information to the insurance company because, ultimately, providing that documentation is the insured's responsibility. The insurance company's estimators are very busy and they often don't have the time to thoroughly document the loss. In most cases, the insured doesn't have the expertise to do it. That's why you need a professional.
This article originally appeared on Insure.com.
You may also enjoy these financial articles:
Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.