When your business or property suffers significant damage due to a fire, broken pipe, or another disaster, your focus should be on maintaining operations and making vital business recovery decisions. One of those decisions includes the filing of a property insurance claim. Unfortunately, the property insurance claim process is complicated, and time consuming which is why having a team of experts on your side is crucial.
While the devastation of suddenly experiencing a catastrophic loss to your property or an interruption to your business is personal; you must remember in the aftermath that the insurance claim process is strictly business.
Accordingly, there are a few categories where the insurance company may read and interpret the insurance policy in a different way than you would. An insurance policy is a legal document that contains coverages and exclusions that you might not realize, as well as deadlines and timeframes that, if missed, can hurt the successful settlement of your claim.
Most policyholders are surprised to learn that paying their insurance premium is not their only obligation to be successful in making a claim. Another obligation for policyholders is to demonstrate to the insurance company how much they are owed post-disaster. The insurance company will offer a settlement amount based on its assessment of the damage and the type of coverages that you have but remember, you do not have to accept its offer. Accordingly, it is important to make sure that all the damages are properly identified and valued; especially any estimates for the cost of repair and/or restoration of the property; as this will have a direct impact on your settlement amount.
For example, insurance companies only pay the depreciated value of property upfront even if you have a “replacement cost” policy. There is no universal scale when it comes to “depreciation” of real and personal property, to measure how much depreciation should be applied, or the rationale for it. When reviewing the insurance company’s estimates, make sure that items which, you are being paid to “replace” are not being “repaired” instead. Remember, property insurance coverage entitles you to be standing in the position you were in prior to having the loss; so, settling for the repair value of property when the right solution is replacement, should be avoided.
In regards to business personal property, it is a requirement for the policyholder to document for the insurance company all the contents that were damaged or destroyed — spanning from something as small as a pen to as large as a machine — which can be very tedious and sometimes feel impossible to do. Policyholders must be diligent and make sure that the property inventory is complete and that the true values of each damaged/destroyed item is supported with documentation. Even with personal/business property, depreciation is applied, so here too, it is important to understand the insurance company’s logic and its application.
For those businesses whose operations have been interrupted by a natural or man-made disaster, the loss of income portion (“business interruption”) of a claim can be difficult to document and prove, so involving a forensic accountant is a prudent move to ensure that your loss of income and extra expense losses are fully accounted for. Be sure to understand the insurance policy requirements for calculating business interruption losses. Additionally, be sure to identify the proper information that should be “included” or “excluded,” as the case may be, into these calculations. Special attention should be paid to the “period of restoration” as well as the tracking of “extra expenses.”
Insurance companies will hire a team of experts to exclusively represent its interests. One of the most valuable options that you have as a policyholder is the ability to hire your own property loss expert, known as a public adjuster, to help prepare, estimate, negotiate, and settle your claim exclusively on your behalf. Enlisting the help of a licensed and respected public adjuster will give you and/or your client the peace of mind that they will receive the optimal settlement amount available under the terms of their insurance policy.
