The toll of natural disasters over the past several months has been shocking. While we watch the evening news with empathy for the victims of flooding, fires and earthquakes, I’m sure many of us are asking ourselves what would we do in similar circumstances.
Those of us living in Southern California have been touched by natural disasters close to home many times over the years—including the devastating Northridge earthquake of 1994, the San Diego wildfires of 2003 and 2007, Sylmar fires of 2009 and the Rancho Bernardo and Poinsettia fires of 2014, to name just a few. Xpera has been involved in evaluating the damage resulting from all of these events, as well as several others representing some of the largest property loss evaluation cases in the United States, both on behalf of insurance companies and property owners.
Based on our experiences from these property loss evaluations, we urge you to take a few easy steps that will substantially enhance your ability to recover in the event that, God forbid, you ever have to seek insurance reimbursement for a major property loss.
The 'pre-Loss Condition' challenge
Insurance does not by any means guarantee that the insured will be “made whole” or “returned to their pre-loss condition.” All insurance will (or can) do is pay for damages reasonably substantiated by the insured up to their policy limits. Therein lies the problem with many insurance claims. Often there is little or no record of exactly what was destroyed.
Most people have upgraded their homes over time with improvements that are not well-documented. Many property owners have added outbuildings, landscaping and other exterior improvements that are not documented at all. Even when these improvements are documented by building permits, the actual level of quality or finish is not documented. Sometimes the only documentation of improvements would come from receipts that were lost in the disaster itself.
When working with property owners, we often have had to “re-construct” substantiation of their loss by using Google Earth or other historic satellite imagery, building permits, tax records, old MLS listings, property appraisals from re-financing, pictures that Aunt Mary took at little Johnny’s birthday party, and even sifting through the rubble for pieces of tile, granite and other evidence of finishes. Trust us. You never want to end up in this situation after disaster strikes. With insurance claims, it’s all about the documentation.
Making Property Loss Claims Much Easier
While we all pay for insurance, a little additional effort and documentation before a claim arises will make the claim process much easier and will certainly enhance the outcome for the property owner.
- Video or photo-document everything you own, and keep the digital record in the “cloud” or another secure place, not on–site. You can even send the electronic file to your broker. It’s quick and easy to do. I documented my personal property by walking with my GoPro through my house, garage, shop, out-buildings, exterior property, etc., narrating the video with descriptions of everything I saw.
- For expensive artwork, jewelry and other special items, you should also store electronic copies of receipts, appraisals and photos in the cloud or offsite.
- Lastly, get a professional opinion of the replacement cost for your home and structures to make sure your policy limits and coverages are adequate. In our experience, it is quite common for the “Schedule B” portion of coverage for out-buildings and other external structures to be underinsured on rural properties, since many brokers use a percentage of home replacement cost to set the Schedule B limits. Also, the more unique the building is, the more likely it is to be underinsured.
Roughly 60 percent of American homes are underinsured by an average of 20 percent, according to CoreLogic, an Irvine-based company that provides data to home insurers. That means that for a $500,000 home, the homeowner will be about $100,000 short when it comes to replacement cost.
We all hope that we will never experience a major property loss, so we buy insurance in case the unimaginable happens. Unfortunately, far too often the devastating impact of disasters is exasperated by inadequate insurance protection or insufficient record-keeping. May the recent tragedies we’ve witnessed on TV serve as a powerful reminder that an ounce of prevention is worth a ton of cure when it comes to protecting your assets. A little effort right now to document what you have insured costs next to nothing and can make a substantial difference in the outcome if you ever have to make that claim.
Ted Bumgarner is president and founder of Xpera Group. He can be reached at firstname.lastname@example.org.