How To File a Home or Fire Insurance Claim – A Guide for Lahaina and Maui Residents
Our hearts go out to those who have lost their homes and loved ones in the recent fire that engulfed our beloved town of Lahaina last week.
This guide is designed to help Lahaina and other West Maui residents affected by the blaze with the aftermath. To that end, we’ll discuss how to document and file a homeowner’s or fire insurance claim, how to deal with adjusters, why and when to hire a public adjuster, and how to hire a contractor while protecting yourself from common contractor scams that affect people in disaster areas.
Before Evacuating
We know it’s too late for those who have already had their homes damaged or destroyed by the Lahaina and West Maui fires of August 2023. This section is for anyone in the future who may be reading this later.
1.) Create a home inventory. Include electronics, musical instruments, art, antiques, and other collectibles. Include serial numbers, and any evidence of appraised values.
You’ll need to do this well ahead of time. This will vastly reduce the time it takes to receive an insurance settlement. It will also help you justify a larger settlement offer, up to the limits of your policy, and give you grounds to fight your insurer if you are not satisfied with their offer.
2.) Update your coverage. Ensure your home insurance policy limit is sufficient to allow you to rebuild in the case of a total loss. Items to consider:
- Contents coverage (covers belongings in the house and not just the house)
- Special endorsements for high-value items (jewelry, art, pianos, custom or antique furniture, etc.)
- Accounting for expensive materials and artisanal construction techniques
- Coverage for outbuildings such as detached garages, carports, sheds, additional dwelling units/guest houses, etc.
- Understand fair market value versus replacement cost
- Landlord insurance vs. homeowner’s insurance. If you rent out your home, an ordinary homeowners’ insurance policy won’t provide adequate coverage, and your claim could be denied altogether. You need a landlord’s insurance policy, specifically.
3.) Take a last-minute video. Right before evacuating, walk through your home and take video and photographs of every room and every closet, including your garage and outbuildings. Take photos of electronics, including serial numbers. This will help you fill out your claim documents later, and help you justify a larger claim.
DO NOT PUT YOURSELF OR YOUR FAMILY IN DANGER TO TAKE PHOTOS OR VIDEOS.
4.) Upload your photos and data to the Cloud. You may lose your cell phone or computer in an evacuation. Make sure you can access your data after a disaster.
After the Fire
1) Contact Your Insurance Company.
After ensuring everyone’s safety upon returning to your home:
- Secure the scene and contact your insurance company immediately
- Your carrier will send an adjustor to your home or business – the adjuster’s job is to verify the damage and try to estimate the dollar value of your loss
Because the Maui fires destroyed at least a thousand buildings, there is a shortage of adjustors. It may take some time before one can come to your home or business, so please be patient.
Meanwhile, you can begin taking the following steps:
2.) Document The Damage.
- Take photos and videos of damaged parts inside/outside your house along with any relevant items affected by the fire
- Start with an overall view followed by close-ups highlighting specific damages
- Include images showing debris left behind from the fire as well as any water damage
- Start a spreadsheet or create a list noting all damaged belongings
- Specify the type of damage (fire, water, smoke, etc.)
- Include approximate value and purchase date for each item you want your insurance company to repair or replace
Dealing With Adjusters
- Be thorough and ready: Prepare your inventory and valuation documents in writing. In the case of the Lahaina fires, your adjustor will have a massive workload. It will be much easier to have everything documented in advance when your adjustor arrives than to have to play “catch-up” with individual items. This will delay the process substantially.
- Document every conversation: Taking notes that include date/time details about everything you discuss.
- Communicate everything in writing: Whenever possible, so both parties have written documentation of instructions provided, use email and certified letters, or upload documents through your carrier’s web portal or mobile app. -Remember to keep a record of everything you upload in case you lose access to the insurance company’s portal.
Additional Living Expense Coverage
Additional Living Expense (ALE) coverage will help pay expenses over and above your normal expenses, because you can’t live in your home. They won’t pay everything – only the difference between your ordinary expenses and your temporary expenses while displaced.
ALE typically covers:
- Hotel bills
- Reasonable restaurant meals (if you’re staying in a hotel room with no kitchen)
- Other living costs above and beyond your normal housing expenses while you can’t live in your home because of damage
ALE coverage may have a time limit, a dollar limit, or both. Understand the limits, and budget accordingly.
Maximize Your Additional Living Expense (ALE) Coverage.
Keep records of expenses such as food, hotel accommodations, rental cars incurred while temporarily displaced during repairs. Some homeowner’s policies cover temporary displacement expenses. Keep track of essential receipts to maximize your claim:
- Save all receipts.
Keep a file for receipts documenting all expenses from contractors and vendors repairing/restoring/rebuilding your home. - Don’t pay in cash.
While you will need to provide receipts to get reimbursed, you’ll also need to provide “verifiable proof of payment” for full insurance proceeds. So you’ll need credit card transaction records, cancelled checks, etc.
Working With Your Insurance Company
Some claims go through without a hitch. Other times, there can be significant delays and even disputes.
Here are some things you should know:
- Don’t take lowball settlement offers. You don’t necessarily have to accept your insurance company’s first settlement offer. Often, they’ll lead with an unreasonably low offer hoping you’ll take it. The better you have organized your inventory lists and other documentation provided in advance make a low settlement offer less likely to happen.
- Adjustors aren’t your friends. Insurance adjusters are great people. But the adjustor your insurance company sends out doesn’t work for you. They work for the insurance company and their job is to resolve any doubts or discrepancies in the insurance company’s favor. Cooperate with them but don’t blindly trust them.
Hiring a Public Adjustor
For larger or more complex claims, or claims that don’t pay out the policy limit, it may make sense to hire a private adjustor. These are insurance adjusters and experts who work for you, not the insurance company.
You may consider hiring a public adjustor if:
- your claim is complex;
- you have a lot of difficult to value items such as art, antiques, and collectibles;
- your home has unusual materials or was constructed with artisanal construction techniques;
- You believe your carrier’s settlement offer was unjustly low or your carrier is acting in bad faith;
- You are elderly or otherwise vulnerable to being taken advantage of;
- You find the process intimidating and feel lost;
Your adjustor should be experienced, and be a member of professional organizations that require adherence to a strict code of ethics, such as the National Association of Public Adjustors and the Hawaii Association of Public Adjustors.
Public adjustors don’t require any money up front. Typically, they get paid a percentage of your claim when it’s finally settled. If your claim fails, you don’t pay anything.
Consult an Attorney Early
The insurance companies all have scores of attorneys on retainer. Very good ones.
You should have legal counsel as well. Particularly for home insurance claims, which can easily reach hundreds of thousands or even millions of dollars in Hawaii.
Completing Repairs After Receiving Your Settlement
- File your insurance claim BEFORE you hire a contractor. Otherwise, your insurance carrier may deny your claim
- Always get multiple bids for any work done
- Only use properly licensed, insured, and bonded contractors – using unlicensed or uninsured contractors could expose you to liability
- Verify your contractor’s license. You can do this by contacting the Licensing and Business Registration Information Section (LBRIS) of the Hawaii Regulated Industries Complaints Office (RICO) at (587) 4272 or through the PVLD online public license search portal
- Check your contractor’s complaint history through the BusinessCheck portal of the Department of Commerce and Consumer Affairs (DCCA) or by contacting the DCCA Consumer Resource Center at (808) 587-4272
- Ask bidders for references to previous clients
- Be careful of door-to-door bidders. Not all of them are bad, just be sure to verify the contractors’ license and get competing bids
- If they ask for an immediate up-front payment “to buy materials” be cautious
Get a written contract. The contract should include every task and repair the contractor plans to make. It should also include start/finish dates and prices for repairs and materials. Do not sign a blank contract, as a contractor can fill it in later with whatever information they want.
- Have an attorney review your contract
- Ask contractors for proof of liability insurance and workers compensation insurance before work starts
- Don’t make large down payments. Instead, work out a series of smaller milestones and release payment in stages as your contractor completes them. In most cases, your down payment to start work should not exceed 15%
- Never make payments to contractors in cash – always use a check or credit/debit card so you have a record of every transaction
Be Cautious About Assignment of Benefits (AOB)
Your contractor may ask you to sign a document “assigning” your insurance benefits to them. This is called “assignment of benefits,” or AOB. When you sign an AOB form with a contractor, you are legally taking yourself out of the transaction, and authorizing your contractor to go directly to the insurance company meaning they can get paid without your involvement.
This can be convenient, but it can be a very bad idea.
When you sign an AOB, it’s very difficult to seek recourse if your contractor fails to perform as promised. If you have a problem with repairs or reconstruction, your insurance company will have already released funds to your contractor and it can be very difficult to collect anything from them or get them to finish or correct any work not done to standard.
By not assigning your benefits, you remain in control. And you only need to release payments to your contractor when you are satisfied with their work, and that they have achieved the progress needed for a milestone payment.
Home Reconstruction Financing
Hopefully, you will eventually receive an insurance settlement offer that will make you whole – or nearly whole – and enable you to repair or rebuild your fire-damaged home in place. However, some may find themselves underinsured, or needing additional funds to complete their home rebuild. It may take a while to catch your breath and pick up the pieces. When the time comes, we’ll be ready to assist, with a loan program that suits your needs.
If you need help with financing a purchase, rehab, or repair, or a rebuild of your Maui home – or a home anywhere else in Hawaii, for that matter, we are here to help with heartfelt support and solidarity from all of us at Pacific Home Loans.
FOR FURTHER READING
FHA 203(k) Renovation Loans
