Homeowners Insurance Claim

How a property loss claim actually works - what the policy covers, the duties it imposes on you, and where claims most often fail.

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What it means

A homeowners policy is several coverages bundled into one contract: the dwelling itself, other structures, personal property, additional living expenses while the home is uninhabitable, and personal liability. Each carries its own limit, and a claim is assessed against the specific coverage that applies. Most policies are named-peril for personal property and open-peril for the structure, meaning contents are covered only for listed causes while the building is covered for anything not excluded - which makes the exclusions the operative text.

Two valuation terms decide how much is paid and are frequently misunderstood. Replacement cost pays what it costs to replace with like kind and quality; actual cash value deducts depreciation. Many policies pay actual cash value first and release the remaining replacement cost only after repair or replacement is actually completed and documented, which means a policyholder who never completes the work never receives the difference. Coverage limits for the structure are typically tied to an estimated rebuilding cost rather than market value, and a home insured below a stated proportion of that cost may have its claim reduced under a coinsurance provision.

The exclusions cause most disputes and follow a pattern. Flood is excluded from standard homeowners policies and is a separate purchase, most commonly through the federal flood insurance program. Earth movement is generally excluded. Damage from lack of maintenance, wear, rot, and long-term seepage is excluded, which is why the distinction between a sudden burst pipe and a slow leak is so often the whole argument. Mold is usually excluded or sub-limited. Many policies in high-wind regions carry a separate percentage deductible for named storms that is far larger than the ordinary one, and an ordinance or law exclusion can leave a gap where rebuilding to current code costs more than restoring what was there.

The policy also imposes duties on the insured, and failing them is an avoidable way to lose a valid claim. These commonly include prompt notice, protecting the property from further damage, keeping records of expenses, cooperating with the investigation, submitting a sworn proof of loss, and if required attending an examination under oath. Every one of those runs to a deadline set by the policy or by state law, including a contractual suit-limitation period that is usually shorter than the general limitation period for contracts - so the policy itself should be read for the periods that apply. Most states also provide an appraisal process for valuation disputes, a public adjuster licensing system, and a department of insurance complaint route, all of which are cheaper than litigation.

Where this comes from

When people hire a lawyer for this

Do three things immediately and before any question of a lawyer arises: photograph and video everything before cleanup, keep every receipt including for temporary accommodation and emergency repairs, and get your own written repair estimate rather than relying solely on the insurer's adjuster. Ask for a complete copy of your policy including endorsements and read the exclusions and the duties-after-loss section. For a valuation disagreement, check for an appraisal clause before considering litigation, and consider whether a licensed public adjuster - who works for you rather than the insurer, for a percentage - is proportionate. A lawyer is worth involving where a large claim is denied outright on an exclusion, where the insurer alleges misrepresentation or requires an examination under oath, where a total loss is disputed, or after a widespread disaster, when contractor and adjuster fraud both rise sharply and signing anything quickly is a risk in itself.

Worried about the cost? A lawyer can be hired for one part of a case only (limited-scope representation), may be paid from what a claim recovers (contingency fee), or may be free through a pro bono program or legal aid; a court can also waive its own filing fees.

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Related terms

Other entries in the same area of law, each written from the same primary sources.

• Adverse PossessionThe doctrine by which a person who occupies land they do not own, openly and continuously for the period the state sets, becomes its owner - the elements, the "color of title" and tax-payment variations, and why it decides fence and driveway disputes far more often than it transfers whole parcels.
• Deed Types: Warranty, Special Warranty and QuitclaimWhat the different forms of deed promise about the title they convey - the general warranty deed's guarantee against every defect, the special warranty deed's narrower one, and the quitclaim deed's none - and what each is used for.
• EasementA legal right to use someone else's land for a defined purpose, without owning it.
• Eviction (Unlawful Detainer)The court process a landlord must use to make a tenant leave - and in most states, the only lawful way to do it.
• Foreclosure (Judicial and Non-Judicial)The process by which a mortgage lender takes and sells a home after default - the court-supervised route some states require and the trustee's sale others permit, the federal servicing rules that must be followed first, the loss-mitigation alternatives, and what the borrower can still owe or reclaim after the sale.
• HOA Covenants and Assessment LiensThe recorded restrictions that bind every owner in a planned community or condominium, the association that enforces them, and the assessment lien that lets it foreclose on a home for unpaid dues - what the documents control, how they are amended and enforced, and the limits the states have placed on association power.
• Implied Warranty of HabitabilityA landlord's obligation to keep a rented home fit to live in - one the lease usually cannot sign away.
• Mechanic's Lien (Construction Lien)The statutory lien a contractor, subcontractor, supplier or laborer may record against a property for unpaid work or materials - the preliminary notices and filing deadlines that make or break it, why an owner who paid the general contractor can still face a subcontractor's lien, and how the lien is enforced or released.
• Purchase Contract ContingenciesThe conditions in a home-purchase agreement that let a buyer walk away with the deposit - inspection, financing, appraisal, sale of the buyer's current home, title - how each is exercised and waived, and what happens to the earnest money when the deal fails.
• Quiet Title ActionThe lawsuit that asks a court to declare who owns a property and to remove a competing claim from the record - used to clear an old mortgage never released, a break in the chain of title, a tax-sale or adverse-possession claim, or a deed that should never have been recorded.
• Security DepositMoney a tenant leaves with a landlord against damage or unpaid rent - held under state rules that usually require an itemized accounting within a fixed period after move-out.
• Seller Disclosure DutiesWhat a seller of a home must tell a buyer about the property - known material defects, water intrusion, structural and system problems, and under federal law lead-based paint - the state disclosure forms, the "as is" sale, and what a buyer can do when a problem was concealed.
• Title Search and Title InsuranceThe examination of public records that establishes who owns a property and what claims stand against it, and the insurance policy that pays if that examination missed something - who is protected by the lender's policy, who by the owner's, and what neither covers.
• Transfer-on-Death DeedA recorded deed that leaves a house to someone at death while changing nothing during life - available in many states, and not all.

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