When your home is damaged, the first thing you need to do, in addition to reporting your claim, is take all reasonable steps necessary to prevent the damage from getting worse. For example, if a storm has blown off part of your roof, immediately get someone to at least cover the roof so that additional damage can be prevented or at least minimized.
You will want to do this because your insurance policy will reimburse you for any expenses incurred in attempting to reduce or contain the loss at hand. The flip side is that the insurance company might actually attempt to exclude coverage for the loss, at least to the extent that the amount of loss could have been minimized had the policyholder taken reasonable steps to prevent the loss from getting worse.
Theft
Homeowner's policies (as well as renters policies) cover you for the theft of your personal property. While it is the insured's obligation to prove that a theft occurred, that does not mean that the policyholder has to prove that an actual crime was committed or prove the identity of the perpetrator. Proof of a mysterious disappearance or circumstances which reasonably infer a theft are usually enough. For example, if an item is stolen from your luggage in a hotel room while you are away from the room, the insurance company needs to presume, as you do, that the item was stolen or has otherwise mysteriously disappeared. Your policy covers you for theft of your belongings even when they are not taken from your home itself. For example, if you live in Ohio and are vacationing in Florida and have a camera stolen, you are covered. Replacement Cost or Actual Cash Value You have a choice to purchase either replacement cost coverage or what is called ACVor Actual Cash Value coverage. The difference is extremely significant. With replacement cost coverage, the insurance company has to pay you what it will cost, in today's dollars, to purchase a like kind and quality item no matter what you may have paid for the items years earlier and no matter that after years of use the item was scratched and dinged, etc. This type of coverage, which is always recommended, is designed to put you back in actual pre-loss condition. You'll be provided enough money to replace a stolen stereo with a stereo just as good as the one you had at today's market prices. With an ACV policy, however, you can only recover the actual cash value, commonly called the depreciated value, of the item in question.
For example, if a 5-year-old stereo was stolen, the insurance company would only owe you the depreciated value for that stereo. If we assume the stereo cost you $500 and has a 10-year useful life, your insurance company would owe you approximately $250, no doubt far less than what it would cost to replace the stereo with one of like kind and quality in today's market. As would be expected, ACV policies are more inexpensive than replacement cost policies.
Business vs. Personal Property Homeowners coverage is intended to cover loss or damage to property which is used by you personally as opposed to property used in a business. If coverage for loss or damage to business property is not excluded altogether, there is usually a fairly significant limitation on the insurance company's obligation to pay for business property, such as a ceiling of $500. Needless to say, it is often a gray area as to whether property is business property or personal property. For example, a real estate agent will most likely have a computer in the home that the agent uses for business reasons when the agent is not at the office. That same computer, however, is probably also used for personal reasons by the agent as well as by other members of the family. In situations such as this, the insurance company will usually look to the unique facts surrounding each situation such as whether the computer is primarily used for business or personal use. Was the computer purchased by personal funds or through a business account? Did the insured depreciate the computer on tax returns? Another common scenario is the construction worker who brings home thousands of dollars of work tools every night after work. If these tools get stolen at home, there may be issues along this line to resolve. For this reason, anyone who tends to blend work property with personal property should consult with their insurance agent to make sure that maximum coverage is available in the event of a loss.
Homes that are vacant, unoccupied or under construction Insurance policies usually contain exclusions which either preclude, or at least limit, the amount of coverage available when the insured premises is not actually inhabited. The reason behind these limitations is that it is well known that properties which are unoccupied are easier targets for thefts or vandals and, as a result, insurance companies want to limit their risk in these circumstances. Therefore, if you should own a property that fits any of these characteristics, be sure to consult with your insurance agent to understand how you can best protect yourself under these circumstances.
Water or Flood Damage
The extent of coverage for damage caused by water is arguably the most confusing of all coverage issues. What may be covered under one company's policy may be excluded under another company's policy.
In general, damage caused by flood or above surface water is not covered by the standard
homeowner's policy. Depending upon where you live and the potential that exists for flood damage, you can usually purchase separate flood insurance that will protect you should that type of loss occur.
With respect to water damage occurring from a source inside the home, there are several general rules that apply. Slow leaks caused by such things as a worn out washer in a hose connection are usually not covered. Insurance policies are not designed to cover what are considered expected or inevitable losses such as loss resulting from an item simply wearing out over time. Stated differently, insurance policies are not intended to cover damages caused by routine maintenance issues. Instead, policies usually describe covered water losses as being those that stem from an accidental and sudden discharge of water such as from a burst or broken pipe. As you can see, it tends to become a question of degree in determining where one draws the line between a leak and a sudden discharge of water.
If the loss is covered, however, the coverage is usually limited to the actual damage resulting from the water as opposed to any damage to the actual source of the leak itself. For example, if a sudden and accidental discharge of water comes from a washing machine hose that broke apart, there is no coverage for the washing machine hose itself, but there would be coverage for all of the damage caused by the escaping water.
Mold Claims
It goes without saying that claims made to insurance companies for damages caused by mold have increased over the past few years. This can be a very tricky area and, should your home develop mold, it is highly recommended that you immediately contact a mold remediation expert in your area and/or an attorney familiar with this type of situation.
In general, however, some mold damage is covered and some is not. As a naturally rowing organism, there is no coverage for mold if the mold is present for that exact reason, namely, that it grows naturally under the right conditions and circumstances and can and will occur without any incident or cause of loss. For example, if mold grows in your basement because you have been inattentive and careless, that's not a problem for your insurance company. In that situation, remediating the mold growth would be excluded since its presence is naturally occurring. On the other hand, if the mold is the result of an otherwise covered loss, then the insurance company is obligated to take care of the mold. For example, if you have a sudden and accidental discharge of water that floods your home and there is mold growth as a result, the insurance company has to take care of the mold problem just as they may have to replace your carpet, drywall, etc., due to the actual water damage itself.
Insurance companies have recently started to impose limitations on mold remediation coverage even under circumstances where the mold damage is considered covered. A common limitation is $10,000 per claim. Policyholders often have the option to increase that amount by paying an additional premium. You should consult carefully with your insurance agent about how to handle your homeowner's coverage in this regard.
When a home has been substantially damaged, another issue that often comes up is the insurance company's obligation to pay for what might be termed code upgrades or construction requirements that may not have been in existence when the home was first built. The classic example is where sprinkler alarms have to be installed and the home did not previously contain sprinkler alarms because they were not required when the home was initially built. Who pays for the cost of the sprinkler alarms that are now required? Many insurance companies will attempt to argue that there are exclusions in the policy that don't require them to pay for these upgrades or current requirements imposed by local law or ordinance.
To avoid this problem, some insurance companies offer its policyholder the option to purchase a policy endorsement which will, in effect, eliminate these exclusions so that there is no issue in the event of a loss. If you own a home that, for one reason or another, may not be up to date in terms of current building codes or requirements, you may wish to consult with your insurance agent about this issue to see what can be done to protect you under these circumstances.
Construction Repair Estimates
In this age of the computer, most insurance companies use computerized programs to determine the purported cost to rebuild or repair a home. From that source, the insurance company will prepare its estimate and suggest to the policyholder that the loss can be settled on the basis of that estimate. In this regard, remember that you have the right to select the contractor that will do the repair work on your home. You are not obligated to use any preferred contractor which the insurance company suggests to you. If your insurance company responds by saying, "that's fine", you can use your own contractor, but we're not paying more than the amount of our estimate, your insurance company is not dealing fairly or in good faith with you. As long as you are using a licensed contractor that is providing like kind and quality repairs, it is the insurance company's obligation to pay any reasonable bill, not direct and control the work. Always remember that even though the insurance company may have initially provided you with a check consistent with the company's estimate, you are fully entitled to request additional monies if and when the actual cost of construction/repair exceeds that estimate. While this might sound obvious, one of the reasons insurance companies are sometimes quick to hand over a check reflecting their estimate is that they know that a certain percentage of people will be under the impression that they don't have a right to go back and ask the insurance company for more money if repair costs exceed the insurance company's estimate.
