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Having homeowners insurance is supposed to relieve financial stress after damage to your home. But if a claim settlement offer falls short of expectations, or your claim is denied altogether, it can leave you more frustrated than ever.
Disputes between customers and home insurers over claim payments occur for many reasons, from fine print buried in a policy to debate over the real cost to fix your house.
If you think you’re getting a raw deal, you don’t have to accept it. Here’s how to make your case and negotiate a better settlement.
Although claim disputes are sometimes too complex to handle without professional help, going the DIY route can be more affordable.
1. Know what coverage you bought
Sometimes claim payment disagreements are the result of confusion about what’s covered by your homeowners insurance.
Before you get riled up about a claim payment or denial, review your homeowners insurance policy to see if you’re covered for the damage in dispute and what the dollar limits are for your coverage. Knowing what you’re entitled to under your policy will also bolster your argument if you’re in the right.
2. Review your claim
If you’re unclear about why the settlement was lower than expected, ask your insurer for clarification. If it cites an exclusion or other specific language in your policy, ask it to point out the section in question.
Document in writing everything your insurer and/or claims adjuster tells you. Keep a log of dates, whom you spoke to and what was said. If you get information by phone or in person, send a follow-up email confirming what you heard.
Once you’re clear on your insurer’s position, prepare documents that can help prove your case, says Amy Bach, executive director of United Policyholders, a consumer advocacy group. For instance, she says, if your insurance company thinks it will cost a certain amount to repair your house but you think it’ll be more, get a written estimate from an independent contractor.
United Policyholder’s claim guidance library includes examples of forms and requests related to claims, plus sample proof-of-loss documents that can help with your case, such as damage reports from independent experts.
3. Appeal your denial or settlement politely
If you need to dispute a denial or low settlement offer, start by writing a letter to your claims adjuster. Briefly explain your point of view, including any evidence you’ve prepared that supports your side, and request that the adjuster review the claim.
Ask for a response within a certain period of time, say, 10 business days. To have a record of the exact day your letter is sent and received, choose the certified-mail option at your post office. Also send a copy of your letter and additional documents to your adjuster’s supervisor.
Even if you’re seething inside, remain polite. Don’t threaten to hire an attorney. If you take an adversarial tone right off the bat, your insurer might decide to let its lawyers do the talking.
4. Ask for an at-home visit, if needed
If there's a dispute over the extent of damage to your home, ask your adjuster to inspect your house again. If you’ve received second opinions from independent contractors or other professionals, such as a smoke-contamination investigator or mold inspector, bring those people to meet with the adjuster.
“Get everyone in the same room,” Bach recommends. Determining the full scope of damage isn’t an exact science, she says, and it may bolster your argument if other experts can physically point to damage that your adjuster might have missed and address potential next steps.
5. No resolution? File a complaint with the insurance department
If your adjuster won’t budge, file a complaint with your state’s department of insurance.
Having the state insurance department on your side can give you powerful leverage in negotiations, Bach says. Unfortunately, she notes, state insurance departments often don’t have enough resources, such as attorneys and construction experts, or the power to resolve certain disagreements between insurers and policyholders.
The department of insurance will help if possible, she says, so it’s certainly worth a try, especially if you want to avoid shelling out for a lawyer.
Find contact information for your state insurance department.
Appraisal is a common process used in disagreements between customers and home insurers over property damage. Both sides pick an appraiser to represent them. Typically, you would hire a lawyer or a public insurance adjuster, Bach says.
The two appraisers review the damage to your home and belongings and try to agree on how much you’re owed. A neutral party, called an umpire, breaks any deadlocks between the appraisers.
Here’s an example of the kind of language about appraisal to look for in your homeowners policy:
"If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. Each party will choose a competent appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of loss."
The biggest downside to appraisal is that it determines only what was damaged and how much that damage amounts to, not whether your insurer actually has to pay that much. Appraisal won’t resolve disagreements over your coverage, the language in your policy or other issues holding up your claim.
Mediation involves hiring an impartial person, or mediator, to work directly with you and a representative from your insurance company to help you come to an agreement.
You and your insurer split the cost for mediation, unless your policy states that your insurer must pay. The mediator can be court-appointed or a private professional whom both sides agree on. You can also go through a state-sponsored mediation program, which you typically can find through your state’s department of insurance website.
Mediation typically is fast, but it’s nonbinding, so you or your insurer can pretend the whole thing didn’t happen if either side doesn’t like the outcome.
Among the downsides: The insurance company’s rep likely will be trained for the process, while it will be brand new to you. Your insurer might also use mediation simply as a way to feel out the strength of your case, meaning you could waste time and money but get no closer to a resolution.
The last resort: lawsuit
Suing an insurance company can be a long and expensive process. Before you start a lawsuit, try the strategies outlined above. In addition, bringing in a public claims adjuster to help you navigate the process at the beginning of a large claim can pay off at the end.