Understanding Property Insurance Claims

When a disaster strikes, simply having insurance in place does not guarantee that your loss will be fully compensated. How much you ultimately get paid can be affected by the actions you as the policyholder take, starting from the moment the loss occurs.

From the first call notifying your insurance carrier, to agreeing on the final settlement, you as the policyholder need to be prepared and ready to act. Knowing and understanding the key steps in the process is key to making sure you receive a fair and equitable settlement.

Understand your Policy

It’s important to understand the fundamentals of a property insurance policy. Your insurance policy is a contract between you and your carrier. As the insured, you have certain duties and responsibilities in the event of a loss. This includes taking all reasonable steps to preserve and protect insured property – things like securing the property to prevent looting, preventing further damage and preventing injury.

Know How to Respond

When notifying your insurance provider of the loss, you are likely to be asked, “How much is your loss?” Be very careful here, as your response can set the tone for the rest of your claim. Do not try to guess at a dollar amount you aren’t sure of. Remember, you are not required to give a dollar estimate at this time. If you try to guess and that value ends up being lower than your actual loss, it’s much more difficult to negotiate a larger amount later on.

Valuing Your Property Loss

Once the preliminaries are over, you must assume the responsibility of measuring your own claim, using experts and consultants who work for you. Concentrate on maintaining your operations — not on preparing claim details. Leave that to the experts. When a property loss results in damages to specialized equipment like computer systems, tools or manufacturing equipment it’s important to have a person who is fully understands the capabilities of these systems to accurately estimate the damage.

Account for Business Interruption

When measuring your business interruption or loss of income, you should have your own expert prepare the claim on your behalf. The insurance carrier will usually hire a forensic accounting firm to review all your records. You should be prepared to make detailed financial, sales and production information available. On the basis of such a review, the forensic accountants will provide to the insurance company their opinion of your business interruption loss.

Remember that business interruption calculations are built upon a foundation of subjectivity. Some common issues often raised include:

  • How long is your loss period?
  • What would your sales have been if your loss never happened?
  • What would your expenses have been if your loss never happened?
  • Did you incur any extra expenses or expediting expenses that are recoverable under your policy?

Issues like these, which could also be subject to policy interpretation, should not be determined by the insurer alone. Remember that the insurer’s accountants are not independent in the true sense of the word. Their responsibility is to represent the insurance company’s interests.

Evaluate Your Settlement

Study any offer carefully and insist on a follow-up meeting where the settlement can be discussed again if needed. Be careful if asked to sign a general release as part of your settlement. You are entitled to collect your loss payment under your policy just by filing an agreed proof of loss. By signing a proof of loss you do not give up your right to reopen the claim if additional damages are later discovered. A general release, however, will forfeit your right to reopen the claim.

It is also important to be aware of the time limits in your policy. Some policies require that you file the claim, together with a proof of loss, within a specified period of time. Additional time constraints might also apply to the filing of any lawsuits.

Have questions about your property insurance claim? Feel free to contact Stark Loss for more information about how a Public Adjuster can help.

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