Homeowner's Insurance: Questions and Answers

The Dusty Hammer asked Dustin Wood with Mountain Tyme Construction to share his expertise on homeowner’s insurance and insurance claims

Dusty Hammer:  How important is homeowner’s insurance? 

Dustin Wood:  Insurance is one of those weird products we buy in hopes we will never use.  It’s hard to spend money on things we don’t want, but properly insuring your home against disasters is vital. 

Too often we buy into the extended warranties for HDTVs and insurance for our smart phones but fail to carry sufficient insurance for the things we really couldn’t afford to replace.

DH:  How do we know we have sufficient coverage?

DW:  It’s estimated that somewhere between 60% and 70% of insured homeowners are under-insured.  This equates to hundreds of millions of dollars in lost insurance claims every year!  If you’re not sure of your coverage level, ask. 

I also recommend you have the insurance company perform an analysis of your home's replacement value (this is done at no cost to you).  You can still opt for less coverage but you are able to make a more informed decision about the policy coverage you are comfortable with and the potential risks and costs - both present and future.  You don’t want to have to wonder when you’re standing in front of the charred remains of what used to be your home.

DH:   In the event of an in home disaster, what should a homeowner do?

DW:  Providing that the occupants are not in mortal peril, the first things the homeowner should do is place a call to his insurance agent.  Then go about trying to minimize the impact the occurrence will have on your life and property.  


Often homeowners put off making a call to their insurance agent fearing a hike in their premiums.  The truth is that Home Owner’s Insurance premiums don’t generally work that way.  Unlike automobile insurance,which is based on your personal record, homeowners insurance premiums are based on the performance of a region.  Your homeowners insurance may increase the next time it’s up for renewal but this increase has little to do with your individual claim.  So pick up the phone, make your agent earn their commission and get yourself whole again.      

DH:  What can people expect when they file a claim?

DW:  A pretty common course of events can be illustrated by the experience of a recent client.  The couple had returned home late one night from an extended family visit out of town.  As they walked down the unlit corridor to their room they heard what she later described as potato chips crunching under foot.    

While they were on vacation, their front load washing machine’s fill valve had failed and water soaked their recently installed pre-finished hardwood flooring all the way to the underlayment.  The “crunching potato chips” sound was the finish on their hard wood floor, which had delaminated as it swelled and cracked. 

Early the next morning they called their agent with the news.  After going over some general information with them, the agent arranged a time for an assessor to stop by the following day.  At the agreed upon time the assessor came by with a disaster clean up team in tow.  
The damage was evaluated and the disaster cleanup team immediately went to work removing the swollen flooring.  They then set up industrial fans to dry out the wet subfloor and limit further damage both above and below the house.  Their agent followed up with the homeowners the same day the assessor finished to help them decide how they would like to proceed with the repairs. 

DH:  So the insurance company lines up the repair work?

DW:  No.  While they usually coordinate the disaster clean up crew in order to limit the damage, but choosing the contractor for the repair work is left up to the homeowner.  
Most insurance companies have a list of contractors they can recommend but ultimately the decision falls to the homeowner.

 

DH:  Can a homeowner do the repairs themselves?

DW:   Yes.  If you feel comfortable doing the work yourself you could save yourself a significant amount of money – on the other hand, shoddy workmanship could cost you thousands in resale value. 

Talk with a qualified professional contractor to discuss what areas you are thinking about tackling yourself.  You may find the areas you can do are not worth the effort you’d have to put into them. 

If you do decide to do some of the work many contractors are willing to work with clients – but be sure to ask up front.  Keep in mind however that if they have to wait on you to finish something you chose to do, you may not only cost yourself time by delaying progress but could wind up costing more money than you thought you were going to save in the first place.  Bottom line: You don't want to end up with a house full of inadequately or half finished projects so make sure you're up to the task you choose to do - there are some things best left to a professional contractor. 

DH:  What is covered by insurance?

DW:  Insurance, generally speaking, is for sudden and unpremeditated damages.  Damage that is caused by long term exposure to something (like a slow leak in a pipe rotting floorboards) are usually classified as neglect and not covered.  A good rule of thumb is if you can put an exact date when damage occurred (like Oct 12) it is likely covered.   There are a few exceptions but I think you'll find that most damages that would impact you are covered.  
About a year ago, my mother was at home waiting for the return of my father from a hunting trip.  As afternoon gave way to evening she tried to keep herself from worrying about him by focusing on the household chores.  My mom has always believed dishwashers do an inadequate job of sanitizing her dinnerware, so for as long as I can remember she flat out refused to have one of those fancy dishwashing contraptions in her home.  “Besides,” she protests. “My way conserves water.”  That’s mom for you, “green” long before green was cool. 

Anyways, listening to the water filling the sink basin soon gave way to other more personal matters.  In a flash she was off to the “ladies room” leaving the warm sudsy water to finish filling the sink.   When she got out of the bathroom the phone rang and soon the dishes and more importantly the filling sink basin were completely forgotten.  She happily went on with other tasks she had elsewhere in the house as the steady flow of sink water streamed across her counter, down her cabinetry and collected in a rapidly growing puddle on the kitchen floor.  

A few hours later my father returned home with his prize deer and was greeted by 3” of standing water.  

When my parents had exhausted the last towel in the house trying to clean up the mess, they discovered much to their chagrin, that the moisture had not been limited to the kitchen. The errant dishwater had run down the wall and created in a huge indoor pool in what used to be the basement. 

Shortly thereafter my mother called me for advice.  After I heard the extent of the damage as she described this mom-made torrential downpour, the swollen cabinetry and subfloor, and the lake dad was now considering stocking with fish downstairs, I chastised her (in a loving son sort of way) for not having called her insurance company first.  She confided that she was a bit embarrassed about her “senior moment” and was convinced her insurance didn’t cover acts of stupidity.  The purpose of insurance is to make sure that personal disasters don’t become financial disasters.  So I told her to hang up and call her insurance agent right away, which she did. 

Insurance paid for all of the repairs.  Mom hired a contractor she was comfortable with who gave her some great design advice (tooting my own horn just a little) and helped get her whole again.  She now has a kitchen she loves even more than the original and jokes she should have had that senior moment years ago. 

The scary part is what might have happened if she had failed to call her insurance fearing they wouldn’t cover foolishness or that her folly might cause her insurance premiums to go up.  Not only could there have been potential health hazards like mold growing unseen behind the wall board, but had something else happened as a result of this accident, she could have voided her insurance entirely.   Homeowners have the responsibility to mitigate their loss - fix the problem as quickly as possible in order to keep the cost down. If you fail in this duty your neglect can void your insurance coverage altogether.  

The moral of the story is:  when facing a major home disaster, you paid for the insurance, use it when you need it - be it natural calamities or disasters of stupidity the absolute worst thing you could do is NOT make the call.