In a perfect world, claims made to insurance companies would be covered quickly and without hassle. And because you are making payments regularly to cover your home, business or structure, you probably expect the process of making a claim to cover a water loss to flow seamlessly once the opportunity presents itself.
Unfortunately, there are many hindrances to receiving the funds needed to hire and pay contractors using the money provided from insurance carriers. Nevertheless, there are things you can do to avoid these unnecessary hiccups, including preparing yourself mentally to have to jump through a few hoops before getting a claim fully covered.
Common Reasons for Delayed Payments
An insurance claim adjuster’s role is to make sure a remediation job is done correctly, and to come to an agreement on a settlement. As such, it makes sense that prior to an adjuster arriving on the scene of a water loss event, the remediation experts that you hire should ensure that they perform their own inspections ahead of time in order to report to the adjuster their findings.
Ideally, your insurance claim adjuster and your contractor will be in communication and can discuss their findings at length, together. Contractors should guide claims adjusters through damages as identified throughout the inspection. Afterwards, a scope of work can be mapped out and a claim summary can be devised that matches up perfectly, ensuring that all parties are on the same page.
Because inspections are designed for contractors to get a chance to scrupulously investigate the water-damaged property and to document wet and unaffected items, this work should be one of the first tasks performed. The purpose is to ensure that what the claims adjuster sees matches the work that needs to be done on the affected structure.
Staff at bank and insurance companies will be assessing the documentation of the adjuster and the contractor, side-by-side. When the documentation don’t seem to match, there will be problems getting money disbursed to involved parties until the issues are eventually sorted out. This can make getting money to pay for services more difficult and can take weeks, and sometimes even months, to resolve.
Requirements to Potentially Avoid Delayed Payments
In order to avoid potentially delayed payments, the insurance company needs to swiftly dispatch a claims adjuster out to the property in question to work with the contractor that has been hired by the property owner. In many cases, work will have to actually ensue before disbursement of replacement costs can be released.
The bank, or mortgage holder, will then need to determine that the funds were actually used to restore the property, and that the work was done by a certified contractor. There also cannot be a lien on the property by the restorer where the work took place.
Lastly, the bank will need to verify that the IRS receives tax information related to the contractors that performed work on the water-impacted structure.
Property Owner Mistakes to Avoid
Although tempting, property owners should be advised that paying ahead of time for remediation work to be completed prior to insurance adjusters and lenders being able to assess the situation prior to repairs isn’t a good idea.
Lenders will be looking for whether or not the work done matches the adjuster’s estimates. This will be difficult to match if work is done prior to an adjuster being able to look over the water loss situation.
If the adjuster’s estimates appear to be changing, as they likely will if work is performed ahead of time, then funds will be delayed. This is especially true if multiple contractors are hired. These delayed payments can often take months to iron out, so paying out-of-pocket for remediation work ahead of time may prove a risky venture.
In addition, there are many times when replacement costs are only paid if actual repairs are made. Actual cash value for the job may be given at the beginning, and later, once the job is complete, the insurance company may disperse the rest of the funds via a 2-party check.
Even if you have checks from the insurance company in your hand, bank lenders still may not release funds depending on whether or not the job is complete, and other stipulations as set forth by the lender.
Because of this, property owners wishing to claim insurance on losses should have one contractor for the entire project, and should ensure that insurance companies and mortgage lenders have the chance to confirm job completion to release money.
Bear in mind, also, that differing job performance dates may further delay the release of funds, especially if they are performed by differing contractors.
Additional bank requirements for the release of funds may include:
- Copy of contractor license
- Signed contracts from all contractors
- Inspections done by lenders to report work completion
- Insurance adjuster’s estimate of damages
- Ensuring that contractor’s contracts match conditional lien waivers
- Matching claims adjuster’s estimates
- Matching claims check with any disbursed supplemental claims checks
What Contractors Can Do To Help Speed up the Payment Process
When dealing with lender issues while trying to have your home, business or establishment remediated, it can help to consult with the restorer to guide you through the process.
In some cases, your remediator may already know about the complexities laid out ahead of you, and they may be able to advise you concerning some of the lender “red tape” and other issues that may catch you off guard while trying to get paid for your claims.
Sometimes, contractors can be listed as a “lead contact” allowing that contractor to take calls regarding the paperwork and other tasks that need to be completed for disbursement of funds. Moreover, your contractor may have information that can help you concerning the bank’s process for 2-party checks. Two-party check processes can be long and intensive and often are dispersed in increments once requirements are fulfilled.
If any glitches or hang-ups occur, it can take weeks to get back on track, and that, only after several phone call attempts are made. For this reason, it is important to go into the process of making insurance claims with patience and the right mindset.
Additional Claims Mishaps
In addition to lender and insurance claim issues, comes the problem of ever-evolving changes in policies. This often amounts to homeowners being under-insured, and as a result, contractors being underpaid.
Situations involving mold, fungus or bacteria, or Category 3 water losses have an increased risk of not being fully covered by insurance. For this reason, it is important that you know your policy ahead of time, including what is covered and what isn’t.
You should also be aware that many of the aforementioned exclusions include bacteria and are evaluated at the insurance adjuster’s discretion. Sub-limits are often around $10,000, even if it is only a speck of mold or fungi that has to be remediated. This is especially concerning for businesses and commercial buildings, as even expensive high-rise buildings that become impacted by water may only be covered for the $10,000 sub-limit if mold or fungi is found present.
In light of these mold, fungi and bacterial restrictions, the mention of mold or bacteria in reference to the water loss will tend to set a bad precedent with insurance claims adjusters. As such, the Environmental Impairment Liability might be a worthy investment for property owners of commercial buildings, as it covers what regular insurance may not in the event that fungi or bacteria is present.
When Making Claims, Knowledge Is Power
To conclude, it is important that you inspect your own insurance policies and make sure that your home, business or establishment is covered before the unthinkable happens.
Once a water event does transpire, you may wish to allow a restoration technician to help guide you through the process of making a claim, as doing so can ensure that your needs are covered and that the process of getting remedial work paid for is seamless for all parties involved.