[StBernard] News You Can Use 9/28/05

[Westley Annis]

September 28, 2005

 

Insurance Matters

 

First off, a little education is in order.  It is important to understand
the difference between flood insurance and homeowner's insurance.    You may
have purchased both policies through the same agent, but they are two
totally separate policies and programs.

 


Flood Insurance 


 

Flood insurance covers damage due to rising water.  For most policies, storm
surge is considered rising water.  Therefore, for all of us who have had the
pleasure of having lots of stinky, muddy water paying a visit to our houses,
we have a flood insurance claim to process.

 

Flood insurance policies are basically all the same.   These policies are
marketed by many companies, but when it's all said and done, flood insurance
is a federal program, referred to as the National Flood Insurance Program
(NFIB). As a result, almost all flood insurance policies are the same. The
benefit amounts vary from contract to contract, but the underlying language
of the policies are the same.  

 

It's important to remember that flood insurance claims are paid by the NFIB
not by the insurance companies themselves.  The insurance companies are used
by the NFIB to administrate the claims process, but the money sent to you to
settle your claim come from the NFIB's pocket, not the pocket of the
insurance company.

 

On the other hand, homeowners insurance covers damage to your house caused
by high winds or "wind driven rain" among other things.  In short, if the
damage to your house was in any way caused by high winds, or by rain falling
from the sky (as opposed to fallen rainwater accumulating in the street and
then flowing into your house - a flood), you have a homeowner's policy claim
to process.   This a much more complicated matter.

 

Recently,  it seems that the flood insurance claims resolution process has
begun in earnest.  I have spoken to several people who have been contacted
on the phone to settle the flood insurance claims.

 

Settling flood claims is rather straightforward.  The water came in.  It did
some damage.  The water left.  

 

The flood insurance claims process is thankfully being streamlined because
it's rather easy to tell where the water did damage.

 

Here's how it works:  The adjuster calls and asks you some questions. If
your flood policy has a $100,000 benefit for structural damage and you want
to receive this full amount, you need to be able to indicate that your home
suffered this amount of damage.  The claim amount is determined by the
adjuster asking you some questions about your house.  They ask how many
bedrooms you had and how they were affected.  They may inquire as to the
type of floors you had, wood, tile, carpet, etc.  They ask about any special
type windows, doors, etc.  They may ask about your cabinetry, your custom
drapes, etc.

 

In short, they are doing their part to 1) justify that you actually suffered
a loss and to 2) determine that the amount of that loss is at least the
amount covered by the flood policy.  For most, being able to justify losses
up to the policy maximum is easy.

 

Flood policies may also have protection to cover losses caused by the flood
and affecting your home's contents; the stuff you had inside your house.  If
your sofa was ruined by the rising water, you can recoup your losses if you
had coverage for contents.  If you had a policy limit of $10,000 for
contents, you need to give evidence that you lost $10,000 worth of sofas,
tables, chairs, etc. due to the rising waters in order to receive this
amount.

 

One thing you should know about your flood insurance is that your home will
be depreciated in determining its value.  For example, a 1,000 square foot
house built last year will get more money out of the claim than a 1,000
square foot house built 20 years ago, even if the homes are right next to
each other.   Therefore, you need to demonstrate to the adjuster that even
though your home may be 20 years old, that new carpet or roof or air
conditioner you put in just last year means it should be treated more like a
1 year old home than a 20 year old home.  This is important.  

 

I don't know what the depreciation rate is, but it could be as much as 1%
per year.  So while the new home's owner would get a check for $99,000
(assuming his damages justified this amount), his neighbor in the 20 year
old house would only get $80,000.

 

Settling a flood claim is relatively easy.  Settling a homeowner's claim is
not easy.

 

Homeowner's Insurance

 

Realize that insurance companies are sitting on the opposite side of the
negotiating table from you when settling a homeowner's claim. This is
different than settling the flood policy claim. In settling the flood claim,
they are giving you someone else's money.  In settling the homeowner's
claim, they are giving you their money.  This is a huge difference.

 

All that advertising you see showing you insurance company as a warm and
fuzzy company being there to help like a good neighbor is baloney. Forget
about it.  It's marketing designed to get you to part with your money (paid
to them in the form of premiums) and nothing else.    Your agent may want to
help you.  Your insurance company wants to do anything but help you.

 

The real exposure for insurance companies lies in their owing us money on
our homeowner's claims.  Remember (again) that flood insurance is a federal
program.  So when they are settling your flood claim, they are not even
playing with their own money. The money they so generously send you on the
flood claim is the government's money.

 

An insurance company adjuster's job is to keep in their bank account as much
of your money as they can.  Any money they pay you as a homeowner's claim
comes from their insurance company's bank account. They do not want to give
you their money. They want to keep their money, even if they owe it to you.


 

Remember this when you're talking with that sweet voice on the phone.  Do
not be lulled to sleep and make the mistake of presuming your insurance
company wants to give you their money. They want to keep their money.  Never
forget this.  

 

In order to get some of the insurance company's money transferred from their
bank account to yours, you will have to demonstrate that you suffered some
damages from wind or rain.  These damages must be in addition to the damages
done by the flood.  

 

If the rain first came into your house through a broken window and messed up
your sofa, and the same sofa was ruined when the flood waters came in, you
have only a flood claim.  You cannot double dip and collect on the sofa for
both a flood and homeowner's claim.

 

The key to getting a fair settlement from your insurance company lies in
being able to demonstrate damage to your property that occurred "above the
waterline," therefore getting some of their money paid to you as a
homeowner's claim.

 

You may have lost some shingles in the storm (caused by wind), and as a
result of the missing shingles, some water found it's way into your house
(caused by rain) and now all the items in your attic or on your second floor
are ruined.   These items would be covered under a homeowner's claim and
would be in addition to your flood policy benefits.

 

The damages caused by wind and/or rain may not be easy to see.  I have
visited my house twice so far.  Neither time was I in a frame of mind to
thoroughly examine the "structure" of my house.  I presume you have been the
same way while visiting.

 

My suggestion to compensate for this mental fogginess is rather simple -
bring a camera with you when you visit.

 

Upon entering, I recommend methodically taking pictures of every wall in
every room.  I recommend taking pictures of your ceilings, your roof, your
windows, your doors.   I recommend taking pictures of everything. 

 

I would even go into your attic and take pictures of what's up there.  I
would take pictures of the underside of your roof just in case water came in
through your roof and left a water line on your boards.

 

After you get back to your home away from home and have had the chance to
settle down a bit from your visit and the fog clears, take your time and
review the photos.  

 

You may see water spots in your ceilings you hadn't noticed while you were
in your home.  Maybe you see your ceiling sagging in spots, an indication
that water may be accumulated on top of your ceiling's sheetrock.  

 

Maybe you see cracks in your walls or in the joints of your house. These
would indicate that your house shifted (perhaps due to a gust of wind) and
therefore, you are due some of your money from the insurance company through
your homeowner's policy.  

 

In the pictures you take of your roof, you may find you have many shingles
missing.  Maybe you see a fence blew down.  You may find a piece of siding
missing.  Who knows what you will find.  We had 140 mph winds whipping
around our houses.  Many houses were damaged by tornados.

 

In short, your objective in taking these pictures is to force the insurers
to handle at least part of your claim as a homeowner's claim.  That opens up
a whole new source of funds for you.  Don't let them tell you there's not
any damages due to homeowner's coverage.  Your job is to find those damages
and point them out to the company.  

 

Remember that the adjuster the insurance company sends out to your house
works for and is paid by them.  You have the right to hire your own adjuster
who works for and is paid by you.  If you are not convinced that you are
being treated fairly by the insurance company's representative, get some
support on your side.

 

Finally, please note that insurance fraud is a serious crime.   Damaging
your property in hopes of getting compensation from the insurers can land
you in jail.  Never forget that the insurance companies have access to
satellite images of your houses and roofs.   They may have driven down your
street and taken pictures of your house.  Heck, they may have already been
inside your house and have their own pictures.  Do not fabricate damage to
your house.

 

All that being said, while insurance fraud can land you in jail, arguing
your side of an issue with your insurer is fair game.  

 

OK, let's review.  

1) The insurance company's adjuster works for: A) you,  B) the insurance
company.

2)  Your insurance company wants to give you your money.  True    False

3)      Flood Insurance claims come out of the pocket of:  A) Your insurance
company  B)The federal government

 

Now go take your pictures.   Remember that film is cheap.  Snap away.

 

DISCLAIMER:  This e mail is intended to help those of us who have been
impacted by Hurricane Katrina.  It may contain information that is somewhat
legal in nature or affect your taxes.

 

References to legal or tax considerations are intended only to alert you in
a general way of those considerations which may effect you.  We do not
engage in the practice of law.   All legal considerations must be referred
to and passed upon by your attorney.  All tax considerations should be
reviewed by your tax preparer.
 
Paul V. Perez
Certified Financial Planner
 
Financial Network Investment Corporation, Member SIPC
7642 Old Hammond Highway
Baton Rouge, LA  70809
(504) 494 3144
(225) 248 6635