It was a sunny Mother's Day, a perfect day for a family gathering. My wife had put a turkey in the oven for dinner with our children and their families.
What we couldn't know then was that our perfect holiday was about to become an absolute disaster. Before the afternoon was over, our home was a near ruin--the result of a fire that started in the basement and spread rapidly through much of the house.
What wasn't destroyed by the flames was heavily damaged by smoke or by the thousands of gallons of water pumped into the house by the firefighters trying to save it.
When the fire was finally out, the house had sustained heavy structural damage, and all the wiring needed to be replaced. Most of our belongings were melted or scorched.
And as the firefighters left that day, we began our crash course in managing a major loss.
In the months that followed, we learned that homeowners face four tasks in the aftermath of a major fire:
--Arranging for emergency living and closing the house to prevent further loss.
--Providing temporary electricity, telephone and water.
--Cleaning up and salvaging the house and its contents.
--Rebuilding and refurnishing.
The first step, though, is to find your insurance policy and reread it. These days most homeowner's policies are written in laymen's language, so it's not that hard to understand what you're entitled to and the limits of your coverage.
After reading your policy, call your agent, inform him or her about your loss and discuss your coverage to clarify where you stand.
Make sure you understand the payout policies for additional living expenses, contents replacement and building restoration. Find out in advance which payout checks will require co-endorsement. Determine the procedural details for final settlement.
Notify your mortgage lender so it can appraise its risk in the loss.
Within a day or so, a claims adjuster should contact you with information on how to process the cleanup and reconstruction claim. You should expect your insurance company to quickly provide you with a check to help you cover emergency living expenses.
Homeowner's insurance covers the contents of the home in addition to the structure itself. It's your responsibility to inventory all items destroyed or damaged. If you are not thorough, you'll cheat yourself. But in making your list, remember that you'll have to document the existence of all the items you claim. A photo or video inventory makes this an easier task, so take pictures of your furnishings and belongings before disaster strikes.
All destroyed contents must be listed, along with their age and current replacement price. It is a good idea to keep receipts of all replacement items you buy, although generally only items over $500 require receipts for reimbursement.
If you do not repurchase an item valued at $500 or more, most insurance policies will pay only the depreciated value for that item, even though your insurance policy has a replacement-value endorsement.
It may take a year or more to repurchase the myriad smaller items. In the meantime, product catalogues can help you to price many general items. Be sure to include shipping costs and sales taxes in your calculations.
As soon as you are past emergency living, however, obtain bids and sign fixed contracts to complete the restoration work.
If the building loss is large, consider hiring an accountant to organize replacement expenditures on a room-by-room basis, which is the way insurance-company estimates are structured. A consolidated report could be helpful in the event the insurance company estimate differs from your actual expenditures.
Also, a budget forecast may be needed before proceeding with work. When there is inadequate coverage, a 10% budget cutback, for example, may be necessary to help you manage your resources as effectively as possible.
For many, a home and its furnishings constitute most of a family's assets. If the loss approaches the policy limit, managing the recovery becomes exceedingly important. Small percentage savings may involve thousands of dollars.
Although there are companies that will manage a homeowner's insurance claims for a 10% or 15% cut of the proceeds, there are a few rotten apples in that barrel--and it's difficult to cull out the good ones in the couple of days you have to do it. In addition, you relinquish the claim you're entitled to by contract. In most cases, it's better to rely on your own good sense to manage the recovery.
Most reputable companies will let the insured select a contractor to handle the repairs. The adjuster may offer the names of at least three contractors as an aid to the homeowner, but the final choice should be made by the insured.