How is the cost of home repairs determined for insurance claims?
When a home is damaged and the owner files a claim with their homeowner’s insurance company, it is important that they thoroughly document the extent of the damages. Thorough claims documentation helps all parties to achieve better project outcomes and often includes the use of:
360-degree capture technologies
Detailed outline of the scope of work involved
In this article, we review some of the language used by various homeowners insurance carriers to guide consumers through the process of determining the cost of repairs.
Home repairs with State Farm Insurance
Defining the scope of work necessary to restore a home to resemble its pre-loss conditions usually follows a physical walk-through of the affected structure. Whoever performs the inspection should be competent to identify, articulate, and perform the necessary repairs. As we discussed in a prior article on this topic of determining the cost of home repairs following water or fire damage, State Farm Insurance advises,
“The most appropriate way to estimate the replacement cost of your home is to hire a building contractor or other building reconstruction professional to produce a detailed replacement cost estimate.”
Often the insurance carrier will create an estimate for repairs and compare that against the estimate of a homeowner’s chosen contractor. It is becoming more common for insurance companies to advise consumers that they do not hire the contractor, rather they will review and confirm the scope as well as the cost and pay the agreed-upon sum to the policyholder.
Home repairs with PEMCO Insurance
As a homeowner’s insurance provider based in Washington State PEMCO has compiled a list of frequently asked questions (FAQs) received from their customers. PEMCO states, “Your home is being insured for what it would cost to rebuild it. Some of the factors we review include geography, cost of materials and labor, ease of access to the site, etc. It's different than an assessed or appraised value.” Many carriers are used to reviewing estimates that are composed in a room-by-room structure that details the scope of work for repairs line-by-line. This is often much more detailed than estimates received from contractors who do renovation and remodeling work outside of the insurance industry.
A common estimating software utilized in the insurance realm is a program called Xactimate which adds standardized pricing to the aforementioned format. For a better understanding of this process, the reader can review our prior post, Why Aren’t Insurance Claims Estimates The Same? Hiring a local contractor to inspect, create a clear scope of work, and provide their initial cost estimate to restore the water or fire-damaged home is often a good starting point.
Home repairs with USAA Insurance
Most consumers are aware of water and fire-related damages as being types of disaster that would likely be covered by their homeowner's insurance. As a nationwide insurer, USAA advises that additional covered loss types may include:
Fire and smoke
Power surges and lightning
Loss of use
Homeowners should discuss coverage questions such as inclusions and exclusions (what is as well as what is not covered in a particular policy) with their local insurance agent. USAA advises that a policyholder should always notify their insurance carrier if their home is damaged, and provides the following guidance about when to file a claim:
If the cost of the damage to your property is more than your deductible
If living in your home is a health or safety risk
If you caused damages to someone else's property
Home repairs with Farmers Insurance
In their FAQs for homeowners, Farmers Insurance recognizes the importance of protecting the investment of homeownership which includes the necessity of purchasing the right coverage. As noted previously, each policyholder should understand coverage limitations in the event of a loss prior to purchasing insurance. With regards to estimating the cost to rebuild a water or fire-damaged home, Farmers states that the primary factors that’ll determine the cost to rebuild a home include:
Local construction costs
The square footage of your home (and the number of bathrooms and other rooms)
The type of exterior wall construction – frame, masonry (brick or stone) or veneer
The type of roof
The number of floors (one to four stories, bi-level or split level)
Special features like attached garages, fireplaces, exterior trim and arched windows
Quality of materials and finishes throughout the home
Cost-estimating software can help expedite the start of work based upon an agreed-upon scope, but the factors listed above will need to be reviewed over the course of the project. For most insurance carriers, the process of supplementing this initial scope and cost includes the same level of documentation that we discussed at the outset of this article.
Home repairs with a local restoration contractor
In years past it was often advised that consumers acquire at least three bids for any work that was going to be done in their home. For the purposes of a homeowners insurance claim, this may not be completely realistic or serve the interest of repairing your home in a timely manner. Cleanfax Magazine shares this insight, “The focus should be on developing a clearly agreed-upon scope of work and, from that, establishing a legitimate and reasonable cost for goods and services. Everyone knows the cheapest isn’t always the best, but the most expensive or the middle of the three has no bearing on value either. In a repairs situation, getting three bids creates less value for the homeowner by delaying the process of returning the property to pre-loss conditions.”
Hiring the right contractor for home insurance repairs
As was stated by one of the largest insurers in the United States, “The most appropriate way to estimate the replacement cost of your home is to hire a building contractor or other building reconstruction professional to produce a detailed replacement cost estimate.” Finding a local contractor that is responsive and able to assist the homeowner with communicating an appropriate scope and reasonable cost should be the goal. Contractors who are familiar with the insurance process understand the critical nature of thorough data capture and utilize helpful technologies to expedite this process. To familiarize yourself with what that process might look like, you will find this article from Claims Pages to be helpful.
Disclaimer: This is not insurance advice
Our team at ARES Restoration takes pride in being a part of our local community and enjoys the opportunity to serve our clients in Pierce County. Water and fire damage leaves home and business owners with the feeling of losing control of their environment. At ARES, our motto is, “Giving You Back Your Home,” as we work to help you thoroughly document the extent of your losses so that we can accurately estimate the necessary repairs and communicate those items to your insurance company.
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