Insurance Claim for Fire Damage

[Jason Coleman]

Hey BP,

So I had my first fire in one of my rentals. This was an electrical fire and NOT the tenants fault. I filed a claim and my insurance company is estimating the damage currently. This is a 4 unit property and luckily the damage seems to be contained to the one unit and no tenants were harmed. Thank you cinder block walls : )

So my question is, how do I know if the insurance company is essentially screwing me on the repair costs? I'm assuming the insurance company wants to pay put the least amount possible. Is this up to me to make sure I have a high end contractor to review and quote the property? Just making sure I understand this process fully. I'm not worried about lost rents which are covered. I'm just worried the potential 20k insurance check turns into a 30k renovation. i don't have actual numbers yet.  Anyone have experience with this? Just want to make sure I'm getting compensated fairly. 

Another quick question. If the fire was from the electrical/wiring then is the insurance company ONLY paying for the one unit to get upgraded electrically? Of course, I would think the insurance company (and myself) don't want to deal with this again with any of the other 3 units. Or would upgrading electrical in those 3 units be my responsibility? Just wondering. 

Thank you in advance for your thoughts. I love BP and can't get enough of this real estate game : ) Preferably no more "apartment fire" calls at 7pm at night though ; ) 

[Bo Bond]

Jason,

Insurance claims are rarely easy to manage, no matter how big or small.  Communication by all parties is key.  The main contacts are you, your contractor/s, and the adjuster assigned to your claim.  It's imperative that these 3 parties stay in constant and clear communication with each other so that the ball isn't dropped.  If you're agent isn't helping you manage this, hopefully they have a claims manager on staff who can.  Most good size agencies have such a person on staff.  

The insurance carrier is running a business just like yours.  They don't want to pay out any more than they legally have to in order to make their insured whole again (back to like kind and quality).  In a typical claims scenario (in my experience), the assigned claims adjuster will likely be low and the contractor will likely be high when it comes to their assessment of the total cost to get things repaired/replaced.  The goal is for you and your agent to get the adjuster and the contractor to sign off on a "statement of loss / scope of work" that they can both agree to.  Until they reach that agreement, there probably won't be much movement/resolution with your claim.  Some carriers may not even cut any checks until the entire scope of work is agreed to by both parties and signed off on.  However, some carriers will cut multiple checks to the insured throughout the entire claims process.  It depends on the carrier and the way they prefer to do business.  Most carriers prefer to cut as few checks as possible during the process.

Also keep in mind that the claims process can also be delayed significantly when the claim is larger (damage is more substantial).  A $200,000 fire claim is naturally going to take a lot longer to resolve and close out than a $10,000 water damage claim.  "Most" water damage claims can be fixed and closed within a few weeks or months, where a fire claim "may" take 6 months to 1 year to close out due to more extensive construction, delays in materials or labor, weather/seasonal delays, etc.  This is just something to keep in mind as you continue along your investment journey.  Sorry to hear about your claim.  I hope you find this helpful!