Tips for filing home insurance claims

In the last three weeks Western Pennsylvania has experienced two weather-related events that the insurance industry has described as "CAT" events. A catastrophic event is an event that happens every 20 or so years that results in a larger than usual number of claims. The two events we experienced were both wind-related.

Because of the large number of claims, there will be delays – delays in looking at the damage and delays in repairing the damage. Priority will be placed on properties that are not livable. Every insurance company wants you to take any reasonable step to protect your property. They will reimburse you for the cost of any temporary repairs even if you make them yourself. Do not make permanent repairs without the approval of your insurance company. They have the right to inspect your property and in many cases will find additional damages to which you are entitled reimbursement. They also do not want you to make any repairs that may endanger your well-being. Once your property is inspected the adjuster will create an estimate of repair cost.

This is just a starting point for insurance companies. It enables the company to issue money to their customers to help begin the recovery process. The estimate is rarely the final estimate but is a good starting point for working with your contractor. Insurance companies may recommend contractors but the final decisions on who repairs your property is yours.

At this point people often become confused with the amount of checks issued by the insurance company. The first check for repairs is issued on an actual cash value basis. Actual cash value is defined as replacement cost minus depreciation. The depreciation is usually calculated by establishing a useful life of the item determining what percentage of that life remains.

For example, a man purchased a television set for $2,000 five years ago and it was destroyed in a hurricane. His insurance company says that all televisions have a useful life of 10 years. The destroyed television today costs $2,500. The destroyed television had 50% (five years) of its life remaining. The ACV equals $2,500 (replacement cost) times 50% (useful life remaining), or $1,250.

The insurance company will issue a check for $1,250 minus any deductible you may have. A deductible is the amount you pay before the insurance company makes any payments. Most policies today are written with replacement cost coverage. In my example once the man purchases a new television and provides a sales receipt to the insurance company, it will issue a second check for $1,250.

While most home policies are issued with replacement coverage, in the last several years some companies have begun issuing policies with ACV on items like roofs. Check your policy to make sure you know whether you have replacement coverage of actual cash value.

As I explained, to get the replacement cost for a damaged items you need to replace it. When dealing with contents (television) the insured can choose not to replace an item and simply keep the ACV settlement. When dealing with the dwelling the insured is not only going to have to make repairs to get the replacement cost, he or she will be required to fix the damage or their insurance company may not renew their policy.

If you are confused talk to your agent. In my experience most claims problems can be resolved with a simple conversation.

Bob Hollick is a State Farm Insurance agent based in Washington. His column appears every other Friday in the Observer-Reporter.