How Do Insurance Companies Pay Homeowners Insurance Claims?
Homeowners insurance claims payout periods vary depending on your state and insurance company’s requirements. However, the process of settling claims typically follows certain procedures. Here is a look at how a claim is assessed and paid.
How Is Damage Assessed During a Claim?
Once you file a claim for property damage, an adjuster will visit the property to examine what happened and assess the loss. The adjuster will consider the following factors:
The square footage of the damaged area.
The damaged items.
Whether the damage can be fixed or must be replaced or rebuilt.
Once the adjuster records all the damage, they’ll use software to determine the value of the loss based on the cost of construction materials and square footage. They also rely on the receipts you provide and the estimated cost of the damaged items. What’s covered and excluded by your policy and the kind of coverage you have will also impact your claims payout.
How Are Replacement Cost and Actual Cash Value Claims Paid?
You can either insure your property based on replacement cost or actual cash value. The type of coverage you choose will have a huge impact on your claims payout. If you have actual cash value coverage, your policy will compensate you based on your property’s depreciated value. Conversely, with replacement cost coverage, your insurer will compensate you for replacing the property at today’s market rate. For instance, if you paid $700 for your existing fridge (that is damaged) and it now costs $ 850, your insurer will pay the current market value. Replacement cost payouts aren’t typically paid in a lump sum. Most insurers will pay you the items’ actual cash value and then make a final payment once you’ve proved that you’ve replaced the damaged item.
The Role of Deductibles in a Claims Settlement
A deductible is an amount you have to pay out of pocket when you file a claim. If your claim is less than your deductible, your insurer won’t compensate you. If your loss exceeds your deductible, your insurer will compensate you for the damage minus your deductible. For instance, say a water pipe burst causes $10,000 worth of damage to your ceiling. If your deductible is $1,500, your claim payout will be $8,500.
Does a Mortgage Have Anything to Do with Claim Settlements?
Claims usually work differently if you’re still paying your mortgage. This is because your lender still has a vested interest in your property. Lenders are additional insureds, meaning the payment is usually issued both to you and your lender if your insurer accepts your home insurance claim. However, personal property checks will be issued only to you.
In some cases, insurers release payments after set project milestones. The final check is issued only after the project has been completed and passed inspection. If your insurer isn’t working directly with your contractor, your lender will likely require the check to be signed by any contractor performing the work.
How Long Does It Take for a Claim Settlement?
The insurance commissioner in your state decides how long insurance companies should take to pay out the claims. Generally, it may take three months or more.
For a cost-effective homeowners insurance policy that will adequately protect your home, contact us, at Jack Stone Insurance Agency. We are here to help you out.
