How Do Insurance Adjusters Estimate Claims To Determine Home Damage?

How do insurance companies estimate roof damage, fire damage, and burst pipe water damage? How should you deal with your insurance company during the estimation process? Keep reading to discover everything you need to know about how insurance adjusters estimate home damage.

What Insurance Adjusters Do

Your company employs salaried workers or independent contract workers called adjusters. These adjusters respond to claims, assess damages, and assist with handling payouts to policyholders.

Here’s how United Policyholders explains the role of the insurance company’s adjuster:
“Insurance adjusters work for the insurance company and are responsible for preparing an estimate of the cost of repair or replacement of the insured’s property loss.”

Sometimes, it’s easy to assess damage. If someone broke into your house and stole your $4,000 TV, for example, then your insurance company can compensate you based on that loss.

In most cases, however, assessing damage is more complicated. It requires technical skills, in-depth knowledge, and careful analysis.

How to Document Costs

After a loss, the insurance adjuster may ask you to document costs. The insurance company won’t immediately approve the rebuilding of your home. Instead, the adjuster needs to document the damage, verify costs, and compensate you based on the specific damages and losses.

The goal with documenting costs is to create an accurate image of the pre-loss condition of the home.

Every home is different. Your home may have similar square footage to another home, but it has different interior finishes that affect the cost.

After a loss, the insurance adjuster interviews the policyholder to create a “scope of loss.” The adjuster wants to determine what was damaged and what home insurance covers.

The insurance adjuster also wants to determine the damage occurred because of the specific loss. If your roof was damaged in a hailstorm, for example, then the insurer wants to make sure the damage was not already present and you’re using the hailstorm as an excuse to make a claim.

Insurance Adjusters Use Xactimate to Estimate Damages

Most insurance adjusters use a program called Xactimate to analyze damages. After a loss, your adjuster may provide you with an estimate from Xactimate.

These tips will help you understand your Xactimate estimate and what it means:

Organization by Room: Xactimate orders damages by room. Sometimes, this is fine. If damage was contained to one or two rooms, then it’s easy to verify that in the Xactimate report. In many cases, however, damage occurred to different systems of your home that aren’t contained to specific rooms. A fire in your kitchen, for example, may damage your entire HVAC system. The room-by-room analysis can also cause the adjuster to miss major functional problems within the building.

“Scope of Loss”: Scope of loss refers to the damage that falls under the recent claim. When a fire damages your home, for example, the scope of loss includes everything damaged by that fire – not any previous damage that already occurred to your home. The scope of loss should include any and all damages to your home caused by the latest incident. Even the best adjusters might miss certain damages in their Xactimate estimate.

Room Dimensions: The Xactimate estimate includes the dimensions of each room. Your insurer uses these dimensions to calculate approximate repair costs. However, there may be mistakes with these dimensions. Even a minor measuring error can lead to 10% to 20% smaller room sizes, for example, which could affect compensation by thousands of dollars.

Waste Factors: When building a home or repairing a home, you don’t use 100% of building materials to complete the project. Instead, there are waste factors. Good estimates take waste factors into account, adding around 5% to each room. One construction expert providing tips on United Policyholders, for example, recommends checking the Xactimate estimate to verify there’s at least 5% more carpet than square footage per room.

Contractor Overhead and Profit (OH&P): The insurance company adjuster can add contractor overhead and profit (OH&P) into the Xactimate estimate. Sometimes, they include it in the line-by-line estimates. In other cases, they add it to the bottom of the estimate. Your Xactimate estimate should typically include around 20% OH&P for a single-family home.

Market Conditions: The insurance adjuster can add market conditions into the Xactimate estimate. The adjuster changes unit cost pricing based on market conditions and regional factors. If the price of lumber has recently skyrocketed, for example, then that needs to be factored into the estimate.

Cost Database: Xactimate has a cost database that covers everything needed to repair your home, including unit costs, labor, and material. Xactimate breaks down costs by city and region. The cover of the estimate features an alpha-numeric code with the heading “Price List,” for example. The code might have the letters “CA” For California and “SD” for San Diego. Then, the code features a letter indicating the year and quarter of the list. 22D, for example, might mean the price list is from the fourth quarter of 2022.

Added Costs and Soft Costs: There are added costs associated with building or repairing a home, including the cost of hiring an engineer or architect, any city fees and permits, construction insurance, and liability insurance for the general contractor, among other costs. Your Xactimate estimate should build these soft costs into the amount.

Insurance companies use Xactimate to estimate all types of damage, including fire damage, water damage, burst pipe insurance claim damage, and other incidents.

It’s Tough to Negotiate Costs With Your Insurance Adjuster Without Professional Help

As an ordinary homeowner, you don’t have the technical knowledge to assess building costs.

Even armed with the knowledge above, you may not be qualified to dispute building costs on your Xactimate estimate.

Some experts recommend buying construction cost manuals, which are technical manuals explaining construction costs in your area.

Or, you can hire a public adjuster near you to help dispute costs. Public adjusters may get a second opinion from a trusted local builder, for example, that changes the insurance adjuster’s Xactimate estimate.

Other Tips for Dealing with Insurance Adjusters

It’s important to maintain a good professional relationship with your insurance adjuster. Some tips for dealing with your insurance company include:

• Understand you need to respond to your insurance company in a timely manner, including reporting the loss within a certain length of time
• Your insurance company is legally obliged to act in good faith
• You have the upper hand because you only deal with one claim, but your insurance adjuster is juggling multiple claims
• Avoid giving the adjuster a recorded statement
• Don’t settle your insurance claim too quickly
• Remember anything you say to your insurance adjuster can hurt you, and a single misspoken statement can nullify your claim

For our ultimate guide on dealing with insurance adjusters, click here.

Having A Licensed Insurance Adjuster On Your Side

Your insurance company’s adjuster likely uses a program called Xactimate to help analyze and estimate damages and the costs to repair.

Based on the estimate, the insurance company may often pay anywhere from 20% to 50% less than you deserve for your claim.

To ensure you get the compensation rightfully owed to you, consider hiring your own public adjuster to fight back against your insurance company. Schedule a free consultation with ClaimsMate today.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.