Congratulations, you just signed a contract with a homeowner who has suffered damage to their home and has utilized their insurance carrier to cover the damages. Now before you jump into the project, it’s important to make sure the scope of work is complete. Did the insurance cover everything they should to properly indemnify your customer?
But first and more importantly, do YOU know how to read and understand the insurance claim itself? There are so many parts to an insurance claim, and so many different types of insurance claims. Let’s discuss the layout and “anatomy” of an insurance claim and then jump into a few terms you’ll want to make sure you know before getting started on a project.
Information Page
Typically, on the first page of an insurance claim, you will get all the basic information you need to know about your homeowner and their property. This will include the homeowner’s name, contact information, the property address, the claim number and policy number, the type of claim (ie: hail, wind), and the date of loss. It will usually also provide the contact information for the insurance company, and sometimes it will include the claim rep information or the estimator’s information, and sometimes some basic details about coverage.
The next number of pages will include the line items that are being covered by the insurance company.
For these pages, the layout may be different depending on the report generated by the insurance company. Sometimes additional information will be provided, such as tax amount, O&P (Overhead & Profit) amount, or % of depreciation.
When we get into the supplementing topics, we will focus more on the quantity/measurements and pricing for each item. We will also focus on how to determine if the insurance included O&P or left it off of the estimate altogether.
Summary Pages
The pages that follow are typically “summary” pages, that include those terms such as RCV, ACV, depreciation, and deductible. There are multiple summary pages based on Dwelling, Other Structures, and Contents, so always remember to look at all summary pages when determining the final RCV amount.
1- Line Item Total: The amount of all the line items which includes material and labor
2- Material Sales Tax
3- The RCV is the “Replacement Cost Value” which includes the labor, material, and sales tax on the material. This is the cost to repair the home to pre-loss conditions.
4- Less Depreciation: The depreciation is based on the age and condition of the roof/damaged item. The depreciation will be held from the insurance company until the work has been completed and the depreciation will only be released on items that ARE completed. For example, if you do not do the work on the gutters, the depreciation on the gutters will not be released.
If a homeowner does not get repairs done to a specific item, such as gutters, this will prevent them from being able to be funded for damages on a future claim.
5- ACV: Actual Cash Value is the RCV minus the depreciation
6- Deductible: This is the amount of money the homeowner is responsible for, as agreed upon between the homeowner and the insurance company
7- Net claim: this amount is the ACV minus the deductible. This is typically the amount that is received by the homeowner from the insurance company in their first check
8- Total recoverable depreciation: This is the amount to be collected assuming all work is completed. Again, if certain work is not completed, the remaining depreciation on those items will not be released. Further, there is occasionally “non-recoverable” depreciation on some line items that can affect this amount. This amount is indicated between < $ > (ie: <$137.89>)
9- Net claim if depreciation is released: Once work is completed, this is the amount that will be released by the insurance company to make the repairs. This does NOT include the deductible to be paid out by the homeowner
Again, once we get to supplementing topics, this page is where you would also look to determine if Overhead and Profit (O&P) has been issued, however it may be included in each line item on the “Line Item Detail” pages.
Types of Insurance Claims, Endorsements & Exclusions
ACV Policy: On this type of policy, the homeowner may have a lower premium, however they are only entitled to the ACV of the claim and will not be paid out on any depreciation. This is important information to know going into a project because this may increase the amount of money the homeowner is responsible for in order to return their home to pre-loss conditions.
RCV Policy: The more common policy type, this allows the insured to collect both the ACV (front end) money as well as the depreciation amount.
Soft Metal Exclusion: For a policy that has a soft metal exclusion, items such as flashing and gutters will not be covered by insurance. It is important to get this information about a homeowner’s policy from the homeowner before a contract is signed. This will ensure that the homeowner knows of any “out of pocket” expenses they may have to cover in order to repair these items.
Code Coverage: This policy inclusion will allow a certain amount of money to be delegated specifically for any upgrades that would be needed to keep the scope of work in compliance with current code requirements.
Surface Schedule Endorsement: This allows the carrier to offer a discounted rate to the insured but also allows them to further depreciate the roof surface items as non-recoverable. This endorsement applies only to wind and hail damage for roofs.
Next, we will dive into the most commonly missed items on an insurance claim and what is needed to try to get these items covered.