A look at the evolution through which insurance claims payment processing has changed over time shows how claims actually get paid in insurance.
- How does payment occur?
- Who is receiving the check?
- Are you supposed to replace the items now?
Here lies the answer.
After a disaster, you would want to get back to normal as quickly as possible, and so does your insurance company. As you make temporary repairs, permanent repairs, and replace damaged belongings, several checks may come from your insurer.
How is Insurance Claims Payment Processing Structured?
The Initial Payment Isn’t Final
In most cases, an adjuster will have inspected the damage to your home and offer you a certain sum for repairs, based on the terms and limits of your homeowners’ policy. The amount you receive in the first check from your insurance company is almost always an advance toward the total settlement amount, rather than a final payment.
If the claim is quickly settled, you accept the check; later, should you discover other damages, you can reopen the claim for additional payment through proper insurance claims payment processing. Most policies require you to file a claim within one year of the disaster. Always confirm the deadlines and rules that apply in your state by checking with your insurance department.
You May Receive Multiple Checks
When your home sustains both structural damage and damage to personal property, your insurer usually sends you separate checks for each type of damage. If your home is uninhabitable, your insurer issues a check for the added living expenses (ALE) you incur while repairs prevent you from living in the home. If you had flood insurance and suffered damages from flooding, that would also trigger a separate check.
Read full article: How Two Back-To-Back Hurricanes Can Impact Insurance Claims?
Your Lender or Management Company May Have Control Over Your Payment
If you have a mortgage on your house, the check for repairs will generally be made out to both you and the mortgage lender. Lenders generally require that they be named in the homeowners’ policy and that they be a party to any insurance claims payment processing related to the structure as a condition of the grant of a mortgage. Similarly, if you are residing in a coop or condominium, your management company may have required the named party on the insurance policy to be the financial entity of the building.
This is so the lender (and/or, in the case of a coop or condo, the overall building), who has a financial interest in your property, can ensure that the necessary repairs are made. When a financial backer is a co-insured, they will have to endorse the claims payment check before you can cash it.
In some situations, lenders may also place funds in an escrow account and pay for the repairs as the work is completed. Show the mortgage lender your contractor’s bid and let the lender know how much the contractor wants upfront to start the job. Your mortgage company may want to inspect the finished job before releasing the funds for payment to the contractor.
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Your Insurance Company May Pay Your Contractor Directly
Some contractors may ask you to sign a “direction to pay” form that allows your insurance company to pay the firm directly. This is a legal document, so read it carefully to be sure you are not also assigning your entire claim over to the contractor. If you’re still not sure, call your insurance professional before you sign.
Assigning your entire insurance claim to a third party takes you out of the process and gives control of your claim to the contractor.
When contractors finish restoring your property, make sure the work meets your satisfaction before allowing your insurer to issue the final payment.
You Should Make All Checks Out to Yourself
Your check for additional living expenses (ALE) has nothing to do with repairs to your home. So, ensure that this check is made out to you alone and not your lender. The ALE check covers your expenses for hotels, car rental, meals out, and other expenses you may incur while your home is being fixed.
Your Personal Belongings Will Be Calculated on Cash Value, First
You will need to provide a list of damaged personal property to the insurer (a home inventory will make this a lot easier). Even if you have a replacement value policy, the first check that you receive from your insurer will be for the cash value of the items, the depreciated amount based on the age of the item. This is a standard part of insurance claims payment processing. Why do insurance companies do this? It is so that the last payment in the claim will match the actual replacement cost. If he doesn’t replace it, then I get the depreciated amount.
To Get the Replacement Value for Your Items, You Must Actually Replace Them
For most insurance companies to completely compensate you for the damaged items, you must, in fact, replace them. The insurance company will ask for copies of receipts for proof of purchase, and then pay the difference between the cash value you received at first and the full cost for a similar kind and quality replacement item. You will, in most cases, have three months from the date of that cash value payment to make your purchases; this, too, should be checked with your insurance agent.
In the situation of a total loss, i.e., the destruction of your house beyond repair together with its contents, the insurance companies usually pay the policy limits, according to the law of that state. This means you can receive a check for what was insured on the house and contents at the time of the disaster.
Read the full article on how a Homeowners Insurance Attorney in St. Petersburg, FL can help you!
What Are the Steps Involved in the Insurance Claims Payment Processing?
- You are going to report the incident.
- An adjuster assesses the damages and the coverage of the policy.
- You pay the deductible.
- The insurance company pays the approved amount, minus the deductible.
- You repair or replace damaged items or otherwise address the loss.
Bottom Line!
We understand that navigating the complex insurance claims payment processing can be daunting on your own. Jenkins Law PL helps you protect your rights, guide you through every step, and ensure you receive the compensation you deserve.
Call Jenkins Law PL today for a free consultation and let our experienced team pursue and confidently take your claim.
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