If your house experiences a fire—such as a sparking outlet causing smoke damage to the living room—you know that your homeowner’s insurance policy has got you covered for repairs. But what happens if the fire is more severe? What happens if there’s a devastating fire where your home and belongings burn down to the point of what seems like no return?
In this (extremely unfortunate) instance, you’d have what’s called a total loss insurance claim. Let’s unpack exactly what this means in terms of your policy, and how you should navigate the claims process after a total loss caused by fire damage.
What is a Total Loss Insurance Claim?
A home is declared total loss by your insurance company if the cost of repairing the damaged property exceeds the property’s actual cash value. (Actual cash value, also known as ACV, is the amount of money that the property was worth at the time of the loss. It accounts for the condition and age of the property before damage occurred.)
There are technically two separate types of “total loss”:
Actual total loss: This occurs when a property is damaged to the point beyond repair. The destruction is so severe that whatever remains of the home holds very little to no value, making it effectively nonexistent in terms of its standing structure and usability. An instance of this would be a home that burns completely down to the point where practically nothing remains.
Constructive total loss: In the case of constructive total loss, the property is not entirely destroyed. There could still be some structural elements remaining, and these parts could, in theory, be repaired. However, the cost of doing so will be much greater than the actual value of the home. Economically, since it makes more sense to start over, it is declared a total loss.
For example, let’s say that your home, valued at around $300,000, suffered from $500,000 worth of damages. Your insurance company will declare your home a total loss, and pay up to the limits of your policy. If your policy had $300,000 worth of coverage, then that’s what you would receive.
How is Total Loss Determined?
When determining whether or not your property is a total loss, your insurance company will evaluate things such as:
- The severity of all types of damage (including water and smoke)
- The total estimated cost of repairs
- The actual cash value (ACV) of your property
When considering fire damage costs, it’s not just your property that is considered. Your insurance company will also factor in the cost of replacing all the items that were inside your home. However, any remaining expenses outside of your coverage limits will have to come out of your own pocket.
Unfortunately for you, the policyholder, insurance companies don’t like paying out total loss insurance claims. That is because they lose a lot of money in the process, and as a result, won’t hand over your settlement check until they’re completely sure that all their terms have been met. They’ll want a list of everything that was obliterated in the fire, for example, which is not always easy to provide.
What to Do in the Instance of a Total Loss Fire Claim
In the instance of total loss, you’re probably feeling immensely overwhelmed, sad, and unsure of what to do next. While all these things are expected, and you should allow yourself to experience these emotions, you also have to remember to be proactive about the claims process.
As mentioned, your insurance company is going to try to make it difficult for you to get paid, and you can’t let them. It’s important to follow these key steps in order to ensure proper settlement.
Get Somewhere Safe
First and foremost, you want to get somewhere safe. Whether that is somewhere on or off the premises, it’s important to make sure you and your family are not in harm’s way. A property that has experienced total damage loss by fire is likely unstable, and whatever is left standing can collapse at a moment’s notice.
On top of that, soot, ash, and fire debris are extremely hazardous materials that should be taken seriously. Exposure to these materials can lead to long-term health and safety issues, so it may be advisable to wear protective gear such as gloves, masks, and sturdy footwear if you plan on being around the property.
Notify Your Insurance Company
Next, you’ll want to notify your insurance company right away that your home is either essentially gone or uninhabitable. They’ll likely want some initial details—start off by letting them know the date or time, cause, and extent of the damage. (To make the process easier, make sure you have policy information on hand.)
Document Everything
You are going to want to document EVERYTHING. Proper documentation is a critical part of the insurance claim process, especially when it’s an instance of total loss. Take photos and videos of the damage from multiple angles, making sure to thoroughly capture whatever areas are most affected. (Do this from a safe distance!)
While it’s fresh in your mind, start writing down every item that you know was damaged or lost, making sure to include their descriptions, date of purchase, and approximate value. If you have digital receipts, begin to organize those as well.
Review Your Policy
While the last thing probably want to do is agonize over the fine print of your insurance policy, you should take the time to review what coverage you have. In particular, you want to see if you’re insured with a replacement cost value (RCV) or actual cost value (ACV) policy.
RCV will completely replace your home and belongings with brand new ones, while ACV accounts for depreciation and pays you out according to that. You also want to see if your policy includes additional living expenses (ALE), which can be used to cover the cost of temporary housing, transportation, and even food.
Consider Contacting a Public Adjuster
Even if your insurance company hasn’t provided you with any settlement estimates, you may want to consider contacting a public adjuster. Although insurance companies technically owe you the money, that doesn’t mean that they’ll make the process easy. In fact, they’re more likely to hurt your case than help it. That is in their best financial interests, after all!
With so much money at stake, you want someone you can trust at your side. A public adjuster is looking out for you, and wants to be sure that you receive a fair settlement. They’ll document damages, file paperwork, and fight against your insurance company until you get the payment you deserve. They know what tricks insurance companies will try to pull and how to avoid them, thereby speeding up the process and getting you your money faster.
Fortitude: the Trusted Total Loss Public Adjuster
If you’re going through a total loss insurance claim caused by fire damage, then contact Fortitude today. Our team of knowledgeable public adjusters has years of experience dealing with total loss claims, and will fight on your behalf to accurately and efficiently negotiate with your insurance provider.
We understand that a total loss is hard. Don’t make it any harder on yourself by navigating the claims process alone!
