Insurance is meant to provide security in the event of an emergency. The policy gives you peace of mind. You pay the insurance premiums on time for years, and after a qualifying event, you expect for the insurance company to pay your claim on time as well.
Few people can afford to handle the necessary costs of repairing a home after a natural disaster on their own. But what happens when insurance—your primary means for managing unexpected risks—falls short in your time of need?
Underpaid flood insurance claims are more common than you might imagine. Since most homeowner’s insurance excludes flood damage, and private flood insurance remains a rarity, most flood insurance claims are handled through the Federal Emergency Management Agency (FEMA)’s National Flood Insurance Program. Homeowners typically purchase the Standard Flood Insurance Policy through their private insurance company or agent. Each flood policy is the same, regardless of which private insurance company underwrites it.
The number of flood claims has skyrocketed in the aftermath of Hurricane Harvey and as a result, policyholders often face longer wait times, multiple adjusters, and more bureaucratic “red tape” than they would with another type of insurance claim.
The Steps for Dealing with an Underpaid Flood Insurance Claim
You filed the claim, and your insurance company has given you the documentation estimating the sum of the total cost of damages. However, you disagree with the insurance company’s estimate. The value does not adequately represent how much money is needed to replace and fix your damaged property.
If the insurance company is not offering enough, there are options. Homeowners often feel that the first amount that the insurance company offers is final and there is no recourse.
This is a mistake. If the insurance company issues initial payment to you, you should accept it as a partial payment.
It is unfortunate how many homeowners accept a lower claim amount even if they do not believe the amount is an accurate assessment of their flood damage.
It can be unwise to accept the first settlement offered by your insurance company. To ensure you receive the correct amount, property owners must often take time to understand their policy and the damage. When needed, property owners may also need to bring in outside help.
If you are unhappy with your flood insurance claim and believe you may have been underpaid, quickly follow these 5 steps before accepting any settlement. The Standard Flood Insurance Policy is governed by federal law, not state law and there are very strict deadlines that you must meet or you will lose the opportunity to dispute your flood claim.
1. Understand your flood insurance policy and coverage
It is important to review your flood insurance policy before and after you receive your claim amount for flood damage. You must know what is covered and what is excluded before you can have the insurance company reassess your claim.
2. Document, document, document your damages
Before repairing or replacing any of your damaged property, take lots of pictures, keep receipts, make an inventory of all damaged or destroyed personal property that needs to be discarded. If you were unable to document the damages before repair or replacement, go through old photos from holidays, family events. You probably have photos of the pre-loss conditions of your home and personal property that you are not considering when under the stress of handling a flood claim. You have to be able to prove flood damage to your claimed items to the adjuster, they are unlikely to just take your word for it.
3. Notify your insurance company and file a Proof of Loss
You should reach out to the insurance company directly. Speak with the adjuster about his or her property damage assessment. Never be afraid to ask for further information. Find out exactly how the claim amount was calculated by asking to see their work. When requesting new information, make copies of any additional documents that you receive from the insurance company.
Advise the adjuster that you would like to file a supplemental claim seeking additional damages. You have the right to obtain your own estimate and submit it to the adjuster. The way to file a supplemental claim is to file a Proof of Loss.
Under the flood policy, there is a 60 day deadline to file a Proof of Loss. It is your responsibility to timely file a Proof of Loss and all supporting documentation. Under Hurricane Harvey, the deadline was extended by a year from the date of the storm. The Proof of Loss is critical to your flood claim. Under the FEMA regulations, your claim will be barred if you fail to timely file your Proof of Loss. Specific information must be included in the Proof of Loss. FEMA has published a form on FEMA.gov that we recommend be used. Documentation of your supplemental claim must accompany your Proof of Loss at the time that you submit it.
If you are unsure of how to properly file a Proof of Loss, you will want to consult with an experienced attorney with experience handling underpaid flood insurance claims.
4. File an appeal or request an appraisal
FEMA provides guidance for how policyholders can file an appeal or request appraisal after they receive a denial of their claim or believe the dollar amount of the claim offered is insufficient for the flood damage and repairs. You have to choose one or the other. If you choose the appraisal option, you are unable to file an appeal at a later date. If you choose the appeal option, you are unable to request appraisal at a later date.
When you want to file an appeal or request an appraisal, make sure you understand the policy thoroughly. Also understand if you are filing your appeal or request an appraisal with FEMA or directly with your insurance company. If you have a flood insurance policy with the National Flood Insurance Program, you will file an appeal or request appraisal with FEMA. If you have private flood insurance, then you will file the appeal or request appraisal with the insurer.
Once your appeal is received, you should receive a written acknowledgement of your appeal. If you do not receive the acknowledgement, you need to follow up with your adjuster or FEMA. Generally, you should receive a decision regarding your appeal should generally be received within 90 days.
Once your request for appraisal is received, you should receive written acknowledgment and additional information regarding selecting an appraiser and the identity of FEMA or the insurance company’s appraiser within 20 days. If you do not receive the acknowledgement, you need to follow up with your adjuster or FEMA. Generally, appraisals take at least 60 days to finalize.
5. Consult with an experienced attorney
Whether you want to file a supplemental Proof of Loss, file an appeal, request appraisal, request more information about your claim, or reopen a past claim, you will want to consult with an experienced attorney with experience handling underpaid flood insurance claims. An attorney can provide a case review and let you know your best options moving forward.
Navigating flood insurance claims can be tricky. Having an expert work through the insurance process on your behalf can make the difference between receiving the full amount you are owed, instead of an underpaid claim. When insurance companies underpay claims and expect policyholders to accept the amount without question, experienced attorneys can fight on behalf of the policyholder.
Many underpaid insurance claims can be settled without going to court. Attorneys will help you walk through the claims process and properly assess the flood damage and claim amount. Furthermore, an attorney can help policyholders communicate with their insurance company and exhaust all their options before litigation. If your insurance company is not responding to your requests or delaying payments, an attorney will fight to ensure your claim is processed and paid in a timely matter.
Unfortunately, wrongfully underpaid flood insurance claims after a natural disaster can be common. Property owners want to make the best choices and not rush into any decision regarding the first claim amount offered by the insurance company, however it is important to act quickly because FEMA has very strict deadlines under the flood policy and National Flood Insurance Program. Seek professional help and ensure you receive everything that you are rightfully owed.