What Do Insurance Companies Check When You Make a Claim?
If you have made an insurance claim, then your insurer will check to verify certain information.
But what do insurers check to verify a claim? How do insurers investigate a claim? What do insurers look for when analyzing your claim?
Below, we’ll explain some of the things insurance companies check when you make a claim.
Your Insurer Sends an Adjuster to Inspect the Initial Damage
To start, the insurer sends an adjuster to your property to inspect the claim and the damage.
The adjuster’s first role is to:
- Authorize additional living expense (ALE) payments to help you pay for accommodation, meals, transportation, and other expenses you may incur as a result of the loss.
- Help you choose an emergency restoration contractor to help secure the scene.
- Inspect the damage, create a report, and consider the next steps.
If the damage occurred because of a covered loss, then the adjuster authorizes payment. Typically, the adjuster sends multiple checks, including a check for structural damage to your property and a check for your personal belongings.
The adjuster may send checks at certain milestones of the repair process. Or, the adjuster may send one or more large checks at the end.
To prepare, read our tips for dealing with insurance adjusters for property damage claims.
The Insurer Verifies the Value of Lost Items & Replacement Options
After a loss, you need to submit a list of damaged belongings to your insurance company along with photos that show actual damage to the covered item.
Ideally, you have a home inventory listing your possessions, their approximate value, and the date they were purchased. Although insurers recommend doing this, most homeowners do not have a home inventory. If you don’t already have photos or a video of each room in your home or building, it is recommended that you prepare one immediately and then update it every 3 months. Then store several copies in different locations in case of a fire.
After receiving your inventory list, the insurer will check and verify the value of each item. The insurer will also check for the cheapest replacement options on the market.
When you buy home insurance, you have two options:
- Actual cash value policies, where you receive compensation based on the value of your items minus depreciation
- Replacement cost policies, where you receive compensation based on the cost of replacing your items with a similar item today
Regardless of which policy you have, your insurer initially calculates compensation based on the cash value of the items in your home. If you have an actual cash value policy, then your insurer may immediately send a check for this value.
When making a claim, you can’t simply claim $2,500 for a name brand 65” 4K TV when you had a budget TV from a knock-off manufacturer. Instead, your insurer verifies the brand of the lost item, the initial purchase price (if possible), the current replacement price, and other information before authorizing payment for each item. This is why it is recommended that you take photos of all electronics and their model and serial number. These numbers can correctly identify items that are of “like, kind and quality”.
The Insurer Checks to Ensure You Genuinely Replaced the Items
If you have a replacement cost policy, then you need to actually replace the items in your home to receive your recoverable depreciation. You can’t simply take money from your insurer without replacing the underlying items unless you are willing to “give up” the depreciation amount that the insurance company is holding on to.
If you have a replacement cost policy, your insurer will only pay you the actual cash value of your items, minus depreciation, until you actually replace the items and turn in your proof of payment.
Typically, you have multiple months from the date of the cash value payment to find replacement items. At this point, the insurer will send a check based on the cost you paid to replace the items in your home.
The Insurer May Verify the True Source and Cause of Damage with an Engineer
If you have a costly insurance claim, then your insurer will conduct due diligence to verify damage.
Insurance fraud costs insurers billions of dollars each year. Insurers want to verify the damage occurred from a legitimate covered peril.
Insurers will check things like:
- The cause of the damage
- Whether or not the damage was caused by a covered peril (like windstorm damage) or a non-covered peril (like flood damage)
- Pre-existing wear and tear that may have contributed to the damage
- Maintenance issues or pre-existing damage
In some cases, insurers hire an engineer to inspect your claim and create a report. The engineer uses their technical expertise to verify the true source or cause of damage. Then, the engineer produces a report based on this information. The engineer’s report can make or break a claim. Be sure to request a copy of the engineer’s report from your insurer. This is typically a good time to speak with a Public Adjuster. They may have prior steps for you to take before you let the insurance company’s engineer on your property.
The Insurer Verifies Contractors Are Completing Repairs Adequately
The insurer may also check to verify contractors are completing repairs adequately. In many cases, in fact, your insurer may pay your contractor directly. This practice is called an “Assignment of Benefits” or an AOB. This is illegal in some states now in order to protect you.
Your insurer may ask you to sign a “direction to pay” form allowing the insurer to pay the contractor directly. It’s a legal document assigning a portion of your claim compensation to your contractor. This usually occurs when you use a “Preferred Service Provider” referred to you by your insurance company.
Read the direct pay authorization form carefully. Some agreements give contractors full authority over your claim. Or, the contractor may perform a subpar job using cheaper materials, then pocket the difference from the insurer.
The insurer and your mortgage company may inspect the property to verify the damage has been adequately repaired. You should also inspect the repairs. Once you and the insurer, and any possible mortgage lien holder, have verified the damage has been adequately repaired, you can let your insurer make the final payment to the contractor.
The Insurer Checks If your Claim Meets a Total Loss Threshold
If you have a large insurance claim with extensive damage, then your claim may be considered a total loss claim.
In this situation, you have maxed out your insurance policy. The cost of repairing your home is greater than the amount of insurance coverage in your policy – your policy limit.
In this case, your insurer should send a check for the full value of your insurance policy. At this point it is always a good idea to reach out to a public adjuster to make sure that there are no additional monies due to you that may be hidden in your policy language. Some coverages are in addition to your policy limits, but unless you know where to look and how to present and document them, you may lose out on these benefits in your policy.
A total loss insurance claim is a big deal, and the insurer will conduct extensive due diligence before declaring your home a total loss. In some cases, however, the damage is obvious: a tornado may have torn down your home completely, for example, leading to a total loss situation.
Hire a Public Adjuster to Ensure a Smooth Insurance Claim
Home insurance claims can be costly, and you can expect insurers to conduct due diligence to ensure it’s a legitimate claim.
You can hire a public adjuster to ensure a smooth insurance claim payout. Homeowners often hire public adjusters for larger insurance claims where the disputed amount is greater than $10,000.
A public adjuster negotiates with the insurer on your behalf, fights for you to receive the maximum amount of compensation, and works to secure your best interests.
Contact ClaimsMate today for a free consultation with a public adjuster and get the claim help you deserve.