IMPORTANT INSURANCE CLAIM CONCEPTS

Indemnification

To indemnify someone means to compensate them for a loss they incurred. This is the concept that all insurance is built upon. You pay a monthly premium so that in the event of an unexpected loss you will be compensated for what was damaged, stolen, destroyed, etc.

The typical homeowners insurance policy covers for damage to your home, your contents (personal belongings, furniture, etc.), and any additional expenses you incur due to the damage (such as having to stay at a rental property while your home is repaired, or eating out after damage to your kitchen).

This means that if the damage you reported is covered, then you should be fully compensated for that damage (minus your deductible). There are some exceptions to this, all of which have to do with specific policy language that might exclude certain things or might pay out only the depreciated value of certain items. But the important thing to remember is that if you find yourself paying more than your deductible, you need to insist on an explanation from your adjuster as to why that is the case. That explanation should include specific language from your policy.

Good Faith

It is important for you to maintain honesty throughout the claims process; it is equally important for your insurance carrier to do so. Your adjuster should be forthcoming about what is owed to you without you having to know every detail of your policy and your state’s regulations. Unfortunately, that is not always the case. When your adjuster fails to share known details with you that result in a reduced settlement, that is called acting in bad faith. By utilizing the tools laid out in this document, you will advocate for yourself in a way that insists on fairness from your insurance provider.

Incentives

The biggest reason people end up with an unfair and inadequate settlement from their claim is due to conflicting incentives. Your insurance carrier likely has a dozen priorities battling with their responsibility to indemnify you. From profit margins to shareholders to worries about setting a precedent that results in them losing money—there are many issues like this that an insurance company has to keep in mind when putting together their claims handling guidelines. They likely want you to be a satisfied and repeat customer as well, but this priority might be in conflict with those mentioned previously when it comes time to pay your claim. It is very unlikely that incentives around company profits and margins are on the mind of your individual adjuster throughout this process, but it was certainly on the mind of the individuals who wrote the guidelines and set the culture for how claims are to be approved and paid. So it remains something that can affect you, regardless of how good or nice your adjuster might be.