Three key questions when filing an insurance claim from the perspective of an emergency service responder with over 15 years assisting property owner's recover from water and fire related damages.
By Jon Isaacson
Investment property owners know what it means to make sounds decisions based upon information gathered from trusted professionals combined with the experiences acquired over a lifetime. Having the knowledge base to make a smart decision is key when you are attempting to maintain value, address current issues and keep a long term perspective. The insurance process can be cumbersome at times as it seems to be riddled with red tape and key words that trap policy holders into the nebulous world of rejected claims. Enclosed are three key questions that will assist you to make decisions on how to proceed with your next insurance related loss. We will primarily discuss water damages in the following scenarios as the bulk of homeowner related insurance claims are water related.
Claims Question #1 - Is this a covered loss or peril?
Another way to think of this is whether the source of the loss/peril is specifically excluded in your insurance policy. Most plumbing related water sources are included by standard policies which would cover plumbing leaks, pipe breaks, overflows and the like. A water heater that is rusted out at the base because of age or lack of maintenance could be a source for coverage concern. Seepage from ground water or flooding from a catastrophic event could be a source for rejection and/or concern if you do not have additional coverage for these items. Talk to your insurance agent and make sure you understand the fine print of what is and what is not covered in your policy.
Is this source/peril covered under my policy? If the answer is yes, proceed to Question 2.
Claims Question #2 - Was this sudden and accidental?
A common loss that is typically covered would be a scenario where the homeowner, or a tenant, returns home and finds that a plumbing line has burst and water is streaming through the structure right out the front door. Interior plumbing breaks are most often covered and the loss classifies as sudden and accidental, most likely this would be a covered loss. Where water damage from a covered peril can become a bit of a grey area occurs when there is a small leak that has caused damage over an extended period of time, indicators such as extensive discoloration, microbial growth (the four letter word – mold) and/or dry rot could be a source for concern. A refrigerator supply line leaking behind the unit may not be noticed by a homeowner or a tenant until there is significant damage to the structure and flooring. While the extent of the damages were not exacerbated by the tenant or homeowner being negligent (they did not know about the loss) yet the evidence will show that the damages have been occurring outside of what would be considered “sudden and accidental.” During the claims process the stakeholders will work to determine the source of the damage as well as the estimated duration of the loss.
Is the loss sudden and accidental? If the answer is yes, proceed to Question 3.
Claims Question #3 - What is my deductible?
Most homeowner deductibles are $500 - $1,000 with many carriers transitioning to a 1% of value related policy (which can be much more than $1,000 on modern homes). As a landlord you may have a commercial policy with a greater deductible. An insurance deductible is the amount you as a policy holder have agreed to pay out of pocket in the instance that you file a claim. A water damage loss that is approved by the carrier as a claim will encompass two parts – first is the mitigation portion which will include the assessment of the extent of damages, removal of affected materials and utilization of drying equipment; second is the repairs portion which will include restoring the affected areas to their pre-loss conditions with materials of like kind and quality. Even if the loss is from a covered peril and was confirmed as sudden and accidental, depending on the extent of the damages and the estimated cost, it may not be in the insured’s best interest to always file a claim. Having an understanding of the extent of damages and the estimated cost for mitigation and repairs are important factors in making decision whether to move forward with filing and insurance claim.
In life we don’t always need to know the answer to every question, but knowing what questions to ask and who can help us find answers are critical tools for survival. Investment properties are a source of pride for you as an owner, protect your assets by surrounding yourself with the information you need to make smart decisions. Keep in touch with trusted partners such as your insurance agent, local contractors and your fellow property owners through networking groups like Eugene, Oregon's Lane County Rental Owner's Association (ROA) so that when disaster strikes you are prepared to respond in a manner that will produce the best outcome for yourself, your tenant and your property.
*This article was originally written for an published in the Lane County Rental Owner's Association February 2017 monthly publication.
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Jon Isaacson has a monthly feature column with Restoration & Remediation (R&R) Magazine titled The Intentional Restorer