After disaster strikes and there is property loss, homeowners submit claims to their insurance companies. Consequently, they may have a lump of cash in the form of a settlement. While the end goal of insurance policies is settlement for properly submitted claims, it is not always that easy for homeowners. Read on to avoid some of the common pitfalls when you receive a settlement offer.
What is a Settlement Offer?
Homeowners’ insurance policies will pay for losses and damages that are covered under the terms of your policy. That is, if you have coverage for hail damage–and you suffer home damage and submit the claim in time–that should be covered by your insurer.
When there is a loss for damage, the homeowner is responsible for submitting a property damage insurance claim to the insurance company. Then, the insurance company will typically send out one of their adjusters. The adjuster will review the damage and will then arrive at an estimate for either fixing the damage or replacing what has been damaged. The insurance company will offer a settlement amount to the homeowner that is either the actual cash value of the replacement cost.
Replacement costs to give you the money to repair the damage or rebuild any structures that were damaged using similar materials. Actual cash value, on the other hand, gives the funds to repair or rebuild as determined by the current value of your home. That value is calculated by the age and condition of the property. It is important to note that the actual cash value may not cover the true cost of replacement. Replacement might exceed the value of your property. It is important to read the terms of your policy very closely to avoid any unfortunate surprises when you are processing a claim.
How Are Funds Paid Out?
Typically, the insurance company will make out a check to both you and your mortgage holder. This ensures that they are in the know so that they can protect their interest. Additionally, you may not receive all of the funds at once. Generally, you will receive some of the funds to hire the work done or pay any sort of deposit. Once the work is completed, the balance will be paid out to the homeowner.
What Things Should I Keep In Mind When Reviewing Settlement Offers?
Here are a few things that you should think about when deciding whether to accept the settlement offer from your insurer.
Insurance Companies Are Businesses
Businesses stay in business when their expenses are less than their profits. Profits for insurance companies come from premiums paid by homeowners. Expenses come in the form of claims paid out.
It is in the insurance company’s best interest to settle for as little money as possible. This does not mean that, generally, insurance adjusters will try to underpay for or get out of paying for claims. However, homeowners may need to really lobby to get all of their expenses paid. This leads to the second point.
The First Settlement Offer is Not Always the Final Settlement Offer
Homeowners will often receive an offer from the insurance company and falsely assume that it represents the best and final offer. This false notion will pressure homeowners into thinking that they have to accept the settlement or they will miss out on receiving any money at all. Don’t fall into this trap. If you think that the settlement does not capture your needs, contest it. You will have to submit support for why you hold that opinion. That may involve hiring your own adjuster or submitting further documentation, for example.
This does not mean that you should try and enrich yourself by getting more money than what is justified. The bottom line is that you should not accept a settlement that you think is unfair.
As the last point alluded to, smart homeowners think long-term rather than short-term. It is tempting to accept the money and get started on the repairs, especially if you are living in a home that is in desperate need of repairs. Remember that what you accept can be final. If you believe that the settlement will patch the immediate needs, but there will be problems down the road, raise it with the insurance company. It is better to avoid having to go through this process again and do it the right way the first time.
Be On Alert
When the insurer and insured contract for a homeowners insurance policy, the homeowner promises to pay a premium in exchange for getting paid the full value of the damage to restore the property. If an insurer tries to get out of paying what the insured is rightfully owed, then the insurance company may be acting in bad faith.
Here are a couple of things that you want to look out for:
- The insurance company is trying to rush the settlement process with you and pressure you to accept as soon as possible.
- There are a lot of unreasonable delays in the claims processing.
- Money offered in the settlement does not appear to even approach the cost of damage repair.
Settlements should be a smooth process. If they are not, consider hiring a seasoned property insurance damage attorney who can ensure you get maximum payment for your repairs.
Speak to a Homeowners’ Insurance Attorney
Contact our office at 321-342-1759 to speak with one of our homeowners’ insurance attorneys if you would like to discuss the particulars of your situation. We present the material contained on our website including this blog for general informational purposes only. It does not constitute the rendering of legal advice and does not create any attorney-client relationship. If you need legal or other professional advice, you should consult with legal counsel about your particular facts and circumstances. Call 321-415-9012 or contact us online to see how we may be able to fight for your claim!