Filing a Fire Insurance Claim: What Can Go Wrong and How to Avoid It

If you find yourself in a position where you have to file a fire insurance claim, you will want to know as much as you can about the process. Your insurance policy is there to help you rebuild after a fire or another type of loss, and making sure that the claims process goes as smoothly as possible should be one of your top priorities.

As you file a fire insurance claim, find out what common problems and mistakes tend to crop up. These problems can range from delays to the insurance process to reasons your insurance company could deny the claim outright.

1) Communication Issues with the Claims Adjuster

Good, frequent communications between the policyholder and the claims adjuster are key to a smooth insurance process. When you are dealing with the claims adjuster, you want to know:

• What your obligations and responsibilities are in the claim.

• What next steps do you need to take, and when you should take them.

• What timeline you should expect.

• What to expect from the insurance company in the near future.

If you do not get clear communication from the claims adjuster, it can be a red flag about how your claims process will go, and you may want to consider seeking out the help of an insurance lawyer or public adjuster who works for you. This is especially true of major claims.

2) The Insurer Underestimates Structural Repairs

When you receive an offer from the insurance company, a common issue is that the insurer has undervalued or underestimated the cost of repairs. They may claim that part of your home does not need to be replaced or repaired when you believe differently.

On top of this, construction costs have soared in recent years, and many insurance policies have failed to keep up, even when they include inflation protection.

Policyholders need to make sure they get as much as possible for structural repairs, or they can face cost overruns. In some cases, if the insurance company does not provide enough to rebuild a home damaged by fire, your mortgage lender may even close your mortgage and take the insurance payment if they are co-payable on the Structure portion for it.

3) You Did Not Factor Depreciation into Your Budget

When you replace lost belongings like furniture and clothing, you should check whether you have Guaranteed Replacement or Actual Cash Value coverage in your policy. This will determine how much your insurance company will provide for you to replace lost belongings.

If you have Replacement Cost coverage, the insurance company will provide funds for you to replace everything you lost beyond your deductible and up to your coverage limit.

If you have Actual Cash Value, things are different. Instead of paying the cost to replace belongings at today's prices, they will pay the value of your belongings in their current condition, with depreciation factored in.

These are all common mistakes that can cost you money when you file a fire insurance claim. Always be sure to read and reread your Long-Form Insurance policy so that you understand the details of your claim. If you are worried about making a mistake on your claim, get help from an insurance lawyer or public adjuster.