A few weeks ago, Mark Paskell, a former independent Massachusetts home inspector who now teaches contractors how to handle customers and insurance claims, was asked to deal with what was believed to be a low-ball insurance company estimate.
The company's adjustor wrote up an estimate for $8,000. But after carefully inspecting the damage himself, Paskell says he "found numerous omissions and discrepancies." He ran the numbers for the visible damages alone, and his estimate was just shy of $80,000 -- nearly 10 times what the insurance company offered.
"I fear that this is (one of) many cases where homeowners will be left out in the cold with insufficient estimates to repair their homes," says Paskell, aka the Contracting Coach.
He's probably right. After a recent workshop, Paskell says he received numerous calls from remodeling and repair contractors about incomplete claim offers that left out damage. And not just hidden damage, but damage that was in plain view.
"Contractors have shared with me over 40 claims in the past two weeks where the insurance offer is less than 50 percent of what it will cost to repair visible damage," he says.
All of which begs the question: What's a homeowner to do if he suspects his insurer's estimate of damages is, shall we say, a little bit light?
For starters, don't believe you have to accept the company's estimate. If you do, you could be forced into making only part of the repairs, or putting up your own money to make all the necessary fixes.
"Insurance adjuster estimates are not to be trusted," says Paskell. "Never take the first offer. ... It is always lower than what they are obliged to pay."
If you believe you are being shortchanged or that the estimate is incomplete, call a contractor who is licensed, insured, registered and who understands the insurance process, and ask him to estimate the cost to repair the damages. The alternative is to hire someone who will do an incomplete job, leaving you less than satisfied.
Another choice might be to hire your own insurance expert. Known as private adjusters, these licensed professionals advocate for policyholders in appraising and negotiating claims. They work much like lawyers, taking a share of whatever settlement they can wrangle from the insurance company. They know what to look for in your insurance coverage and how to tussle with insurers.
Another good idea is to check the credentials of the insurance company's adjuster. Often, when there's a weather catastrophe such as a flood or tornado, insurers will bring in additional adjusters from other parts of the country.
The idea is that with the extra adjusters, claims can be paid more quickly and owners can get on with their lives. But sometimes, the out-of-state adjusters are unfamiliar with local building codes and techniques.
Just as you have the right to ask for an appraiser who is from the area and has complete knowledge of it, you have the right to request the same from your adjuster. You may have to wait longer, but it could be worth it.
Paskell has identified several tactics used by insurers to rip off their customers:
-- The adjuster fails to assess all the damage. Some "leave things out on purpose," the Contracting Coach says. "Homeowners who are not familiar with the complicated claims process do not always know what is covered."
If that sounds like you, you may never know if something should be repaired or not unless the adjuster mentions it.
-- The adjuster writes an estimate solely for the damaged area, leaving out connected walls, ceilings and finishes. For example, the estimate might cover replacing a bathtub, but not the wall tile abutting the tub. Or it might call for painting one wall rather than the entire room -- or for just one coat of paint when professionals would apply two.
Insurance companies are supposed to bring their policyholders' properties back to their pre-loss condition, Paskell explains. Doing an incomplete job could leave you, as in the case of the examples above, with mismatched tile or walls.
-- The adjuster leaves out the cost of required permits. You need permits for practically everything these days. If the insurer doesn't pay for them, you will have to, and that's money out of your pocket.
-- Companies use a software product with pricing that is fixed by category and geographic area. Paskell says contractors who carry the legal costs of doing business usually can't work for the rates suggested by this program. Indeed, with those kind of rates, he says, you are likely to attract unlicensed, uninsured contractors who bend the rules or ignore them altogether.
-- If your policy calls for "loss of use," and you cannot occupy your home while the repair work is underway, the insurer should pay you up-front for the cost of living in comparable accommodations until the work is complete and you can move back into your house.