WEDNESDAY, JANUARY 27, 2021
A home insurance claims adjuster is generally the individual that handles claims on your home insurance policy. When you file a claim, your insurer will send a claims adjuster to investigate the claim and they will:
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Identify what was damaged
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Verify that you have coverage for the specific incident
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Calculate how much compensation you will receive
If the damages are covered by your home insurance policy, the adjuster will calculate how much compensation is owed based on the damages. If the damages are not covered, however, you will not receive compensation.
What is Covered Under Home Insurance?
Home insurance policies vary, but most basic policies include coverage for damage caused by fire, wind, hail, lightning, smoke, explosions, theft and vandalism. Many basic home insurance policies do not include coverage for earthquakes or floods and only include limited coverage for expensive items such as jewelry, furs and art. Be sure to speak with your insurance agent about enhancing your home insurance policy to guarantee that everything is covered that needs to be.
Beware the 80% Rule
How adjusters calculate compensation is not only based on how much coverage you have, but on how much you should have. Home insurance policies operate under an 80% rule. All homes should be insured with at least 80% of the home’s total replacement cost value. If you carry less than this amount, you could receive less compensation than you originally expect.
For example, say the total replacement cost value of your home is $300,000 and you’ve insured it for $150,000. A bad fire causes $50,000 in damage to your home. Since the damages ($50,000) are significantly less than the amount of insurance you have ($150,000), you may think that all of your damages are covered. Unfortunately, this isn’t the case due to the 80% rule.
80% of your home’s total replacement cost value of $300,000 would be $240,000. Since you are carrying less than 80% (in this case, 50%), your compensation will instead be calculated based on how much insurance you should have been carrying—in this case, $240,000.
To calculate how much compensation you will receive, the adjuster will divide how much coverage you have ($150,000) by how much you should have ($240,00) which is 62.5%. In this case, the insurer will cover 62.5% of the damages which, from $50,000, is about $31,250. Unfortunately, this means that you will be expected to pay the remaining $18,750.
Be sure to speak with your insurance agent and claims adjuster if you have any questions about a claim settlement.
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