The repair process after a significant loss like a fire can seem like a good opportunity to finally renovate your home. It doesn’t make sense to restore your home just to tear it up again a few months or years down the road to build that addition you’d been planning.
However, any optional renovations as you repair or rebuild will be tied up with your insurance claim. Insurance settlements only cover the costs of restoring your home (to the way it was), and sometimes insurers like to work directly with their own contractors to make those repairs. That can make it difficult to get optional changes done. These are the steps you need to take to try and manage the claim and the renovations in one simplified process.
1) Contact Your Insurer
It’s your responsibility to contact the insurance company as soon as possible after a loss. You will not be able to begin work until your insurance claim is opened and the process has begun, so you should initiate this process quickly. Delays can also complicate the process.
2) Get a Damage Assessment
The insurance company will assess the extent of the loss and provide a “Scope of Work” outlining what structural repairs need to be made to put the home back to the way it was. In addition to structural damage, they also assess the loss of personal belongings. The insurer approves or settles the structural claim using estimates which will be based on the Scope of Work.
If you’re not sure the company has made a fair offer or if you think items were missed in the Scope of Work, you can get help from another party.
While the insurer will bring in their own adjuster, you can hire an independent insurance adjuster like Virani Law to represent your interests. They will evaluate the insurance company’s offer and ensure the accuracy of the Scope of Work.
3) Document Losses for the Insurance Claim
Before you begin cleaning up, removing lost belongings, or making any repairs, make sure that your losses are well-documented. You may need to prove losses if a dispute arises with the insurance company. Its a good idea to run any work by the insurance adjuster first, so that they can come look at the concern (if they want) before it is rectified. It is also a good idea to document communications with the insurer and track progress once work begins.
4) Find a Contractor
In some cases, the insurer will solicit bids several preferred contractors. The lowest bidder usually gets the contract, and that establishes the value of your claim. That’s why it’s so important to get an accurate and thorough Scope of Work.
If the insurer wants to go with their preferred contractor, you will have to request a pay-out to go with your own. If you decide to go with your own contractor, you will be on the hook for the difference between your own costs and the lowest bid made to the insurer.
5) Prepare to Pay for Renovations Out of Pocket
If you’re going to renovate the home in the wake of a fire, don’t expect the insurer to put any money toward it.
In order to make changes and renovate, you will likely have to demand that the insurer pays out your structural claim rather than giving the work to a preferred contractor. Homeowners who still have a mortgage on their home may find that the mortgage company is co-payable on their insurance claim. They may insist on releasing payments only as work is completed, as a way to safeguard their investment.
Some contractors will provide a separate Scope of Work for the renovations, even if they are one of the insurer’s preferred vendors. If this is the case they should be able to get the repair work funded directly by the insurance company, and arrange payment from you for only the renovated portions.
It is possible to do renovations in the wake of a fire, but it can complicate the insurance claim process. Work with an independent insurance adjuster and avoid paying more than you have to.