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Personal Insurance: Avoiding Additional Loss After A Storm

Summer has a distinct sound – hamburgers sizzling on grills, music playing at outdoor festivals and bats crashing into baseballs. You’ll also likely hear the crack of thunder, the howl of strong winds and the clink-clink-clink of hail (probably bouncing off your roof or car). Inclement summer weather is unavoidable in many areas of the country, and people are often left with a sinking feeling as they are forced to listen to their homes and automobiles weather a severe storm. If you’ve ever experienced this, your first thoughts were probably about the deductibles on your homeowners and auto insurance policies.

As the storm dissipated, you may have wondered what your first course of action should be. Are you supposed to call your agent or broker immediately? Take your vehicle into a body shop? Call the carrier yourself and file a claim? (Spoiler alert: the answer is no!) Let’s walk through the proper steps you should take following a severe storm so that you can hopefully mitigate any further damage after the skies have cleared.

Talk to Your Agent
Your first call should be to your agent or broker. If you don’t already know your deductible for wind / hail, request this information first. Many insurance carriers have instituted a separate deductible for wind / hail because of the high (and frequent) claims associated with these perils. They’ve essentially “upped the ante” and mandated a bigger buy-in for insureds who file wind / hail claims. Furthermore, the type of roof covering you have may not matter. Whether it’s wood shake, asphalt, slate or a trendy “50-year composite,” the majority of carriers have increased deductibles to either a flat dollar amount or a percentage of the dwelling value. The percentage deductible is typically 1% to 2% of the replacement cost of a home, so if you have a $400,000 home and your deductible is 2% for wind / hail, then you’d be responsible for $8,000 of that claim.

Get an Estimate
If you’re not 100% certain that you’ve sustained a major loss, the next course of action is to obtain an estimate for your home or vehicle. Contact a roofing contractor or take your vehicle into a body shop and have them assess the damage. You can then compare those estimates to your deductibles and discuss the best course of action with your agent. Obtaining an estimate is an important part of this process and the reason why you shouldn’t file a claim immediately. Regardless of how much a carrier pays out on a claim, a loss will negatively impact future renewals of the policy, as well as your marketability in seeking a new carrier down the road. Let’s use the previous scenario as an example: If the cost to repair your roof is $10,000 and you’re paying $8,000 of that, is it really worth filing a claim? You’d pay 80% of the claim while the carrier paid 20%, and then your rates would likely go up at the next renewal. Even though you’ve been paying premiums and this is the precise reason why you have coverage, filing a claim may not be in your best interest.

Another reason to obtain an estimate before filing a claim is that the estimated cost for repairs might actually be less than your deductible. In this instance, you’d likely handle the repairs on your own instead of pursuing the claim, but the damage would have already been done to your policy. That claim will appear on your loss history for three to five years – even if nothing was paid by the carrier! That will have an adverse effect on your rates for future renewals. Your agent can help you avoid these pitfalls and guide you toward the best decision based on your particular situation. There is not a “one size fits all” response approach after a storm.

Post-Loss Assignment
If you do file a claim, it’s important to remain vigilant during the repair process. Roofing contractors have a history of infiltrating areas hit by storms. Many of these companies aren’t local and they prey on people who need quick repairs to avoid further damage. We urge you to get multiple estimates and thoroughly vet all potential contractors. Whenever possible, use a local company with good references. It’s important to remain cautious and be wary if a contractor asks you to sign a post-loss assignment contract. This is an agreement signed by a homeowner after a covered loss that grants the contractor all rights and duties of the claim under the insurance policy. Once signed, the contractor owns and controls the claim without any input from the insured. In most cases, insureds are asked to sign a post-loss assignment at the same time as the repair work contract. Policyholders are often persuaded to sign because contractors say that the post-loss assignment simply empowers them to correspond or adjudicate the claim with the carrier. However, a signed agreement essentially cuts the policyholder out of the picture. This can have serious ramifications, such as:

  • There may be a time when the carrier and contractor disagree about payment for the claim. If they cannot reach an agreement on payment, the contractor could sue the carrier and the suit would be filed in your name against your insurer. The contractor does not need your permission to file the suit, and you would not be notified of the suit nor would you have any active involvement in it. However, the suit may have an impact on your rates and insurability in the future.
  • You may still be financially responsible to the contractor for the difference in the contractor’s price and the carrier’s payment. The contractor may file a lien against your property.
  • You may be displeased or have a disagreement concerning the quality or scope of work with your contractor. If you wish to fire your contractor and hire a new contractor, the assignment is still valid. This means that your prior contractor would still own all rights (including payment) on your insurance claim.

Once you’ve signed any contract (roofing contract, post-loss assignment or otherwise), you are locked into a binding agreement. When necessary, have your agent or attorney review contracts prior to signing them. Dealing with a potentially expensive claim can be burdensome enough – don’t let it spiral into a messy legal issue as well.

Come Rain or Shine
It won’t be long before those familiar “summer sounds” start filling the air again. Take time to understand your policy and the applicable deductibles for wind / hail, and establish a plan of action following a major weather event. If you find yourself filing a claim, know your responsibilities and what you are agreeing to when lining up repair work. Your agent should be happy to help you every step of the way. Don’t let a little wind and hail keep you from enjoying all the burgers, ball games and outdoor fun that summer is meant to be about.

This article originally appeared in the 2017 | ISSUE THREE of the SilverLink magazine, under the title “The Damage is Done… Or Is It? | Avoiding Additional Losses After a Storm.” To receive a complimentary subscription to the SilverLink magazine, sign up here.

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