Home Fire Insurance and Rebuilding

You are allowed back to your home after a fire, have salvaged what you can, and are ready to resume your life. Here are tips on how to deal with the insurance company and contractors, so you can gain proper coverage and rebuild your home.

Home Fire Insurance and Rebuilding
You are allowed back to your home, have salvaged what you can and are ready to rebuild your life Here are tips on how to deal with the insurance company and how to deal with contractors to rebuild your home.
Filing a Claim
You should contact your insurance agent or the insurance company that insurers your home immediately and make sure they know you had a loss and are making a claim. If you don’t have a copy of your insurance policy, ask the insurance company for a copy. It is a good idea to read your policy to understand what is covered and what is not. Making a claim starts a legal time clock to keep everyone moving toward resolving your claim and getting you back into your home. Your insurance company has a duty to handle your claim timely
Pay Your Bills
It is important to remember that you still have to pay your mortgage payments along with your other bills even though your home may be gone or uninhabitable. This is a hard one for some people to understand because now you have to make a house payment for a house that you can’t live in while staying at a motel, rental home or with friends or family. You still need to make your house payments. Some lenders may allow a grace period for the first month after the disaster but don’t count on it. You want to make your payments on time if you can unless the lender has told you otherwise.
Your Extra Expenses
Things such as motel expenses, laundry, some food expenses, etc are things that might be reimbursed by your insurance policy. These are additional expenses above what you would normally spend to live. It is important to keep accurate records and get receipts. You may have to pay many expenses out of your own pocket which will be reimbursed by your insurance company. Some companies offer an advance on your Extra Living Expense coverage. You should ask your insurer.
Clean Up
It is going to be your responsibility to clean up the mess and rebuild your home. The insurance company is not going to do it for you. They may offer assistance and/or give you names of quality companies but in the end, you are responsible for clean up and rebuilding. The first major task is going to be cleaning up the initial mess. You are going to have to go through the debris to see what you can salvage. Then you will need to have a company clean up the remaining debris. The expense of that should be reimbursed or paid directly by your insurer. This is going to be an emotional task for you so take your time. Work methodically and steady and you will get through it. Ask for help if you need it. Your insurance company may offer some resources for you.
Taking Stock of Your Losses
The next task is going to be to provide a list of what you have lost to your insurance company. This is the time to assess just how much you have lost. You should methodically go through each room and catalog what you had and what you lost. Some insurance companies will give you forms to complete and others will accept lists you generate on your own. It is important not to rush this process. Sometimes we forget what we have. Take your time. Go through old photographs if you have them, talk to all family members and be thorough. The process may take you days or weeks depending on what you had and how much you lost. That’s okay, take your time and don’t let anyone rush you.
Rebuilding the House
You will likely be inundated with offers from contractors to rebuild your home. Most are reputable but some are not. Again, the key is to take your time. It is important that the contractor be experienced in fire restoration specifically, and they should have knowledge on how to work with your insurance company. Remember: don’t give anyone money now. Anyone working with you for clean up or other things right now should be willing to work with you to bill you or your insurance company.
Selecting a Contractor
Selecting a contractor is an important step. This will be a marriage of sorts for a few months. Get a couple of bids. Get to know the contractor and the representatives that work for them. Rebuilding can be a pleasant experience or a horrendous one depending on how much time you put into selecting the right contractor.
Check out contractors. Just because a contractor is from out of state does not mean that they are a bad contractor or are “fly by night”. Some reputable companies specialize in disaster reconstruction all over the US and do good work and have good reputations. There are however unscrupulous contractors out there so you should beware. In California, the Contractors State License Board, CSLB, requires all contractors to be licensed and maintains a website where you can check the status of a contractor’s license.
You want to be sure that the contractor has Liability Insurance and Workers Compensation Insurance for California. If someone gets hurt while working on your house and there is no workers compensation in force, you could be held liable for that workman’s injury. It is better to require a Certificate of Insurance for Workers Compensation from your contractor.
Out of Pocket Expenses
You may have some out of pocket expenses associated with replacing all your belongings and rebuilding your house that are not covered by insurance. Besides your deductible, you should be aware that the insurance company may not pay 100% of your loss. Many catastrophes in the 1980s, 90s and 2000s have forced insurance companies to rewrite their policies. Most don’t offer full guaranteed replacement cost policies and will pay you based on the Actual Cash Value Method (ACV) which takes into account how much the item cost originally, less any applicable depreciation. In some cases the insurance company may only pay 50% to 80% of the value. When you rebuild your house, you may want to upgrade certain things that may not be covered by your insurance company and you will have to pay that yourself. If you need help coming up with that extra money, you could look to home equity lines of credit, refinancing your home, or other debt. Also there are some sources of low interest rate loans and grants available through FEMA. Some of the expenses you pay to rebuild your home may be tax deductible. Seek the advice of a qualified tax advisor before claiming any tax deductions.
Paying the Contractor
It is important to know where ALL the money is going to come from before starting construction. Do not give your contractor a big lump sum payment in advance. A reputable contractor should be willing to start work with a payment due after something substantial has been done. For example, once the foundation has been cleared and lumber is delivered a partial payment would be warranted. Breaking the payout into 4 or 5 payments is a good approach. This allows the contractor to work without being financially strained paying for supplies and labor and protects you. You should hold a little money when the work is done to make sure that the last little punch-list items are completed. This should be comparable to the value of items to be resolved. These are good things to discuss with your contractor before you begin work.
Warranty
You should expect your contractor to provide you with a home warranty. Builders are required to provide a 1 year warranty and some provide longer. The warranty is for materials and workmanship but there are longer warranties associated with the components of the home such as the appliances and heaters or air conditioners.
Resolving Disputes
In resolving disputes with your insurance company, the State of California has a proactive Department of Insurance (DOI). They maintain an active complaint investigation department and will take insurance company complaints.
To resolve disputes with Contractors, the Contractors State License Board (CSLB) maintains license control and investigates complaints against contractors.
This article was provided by Koman Homes. Larry Koman has been a licensed California contractor for over 20 years. He is currently the owner of Koman Homes, Inc., located in Bakersfield, California. Prior to returning to home building, Mr. Koman worked for one of the largest property and casualty insurance companies in North America. His years as a Structural Damage Appraiser and Construction Specialist make him an expert in construction and insurance issues. Larry earned the prestigious CPCU insurance designation from the American Institute for Chartered Property and Casualty Underwriters and a Certificate in General Insurance from the Insurance Institute of America. In addition, Mr. Koman holds and MBA from Cal State University and a Certificate in Construction Management from San Jose State. For more information visit www.komanhomes.com.
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