The most critical time for your business and/or property to prepare for an eventual insurance claim is right now before there is an imminent threat. Unlike tropical storms, hurricanes some number of days to prepare, most property damage events occur without any notice. Think about flash floods, fires, hailstorms, tornadoes, theft, and vandalism. You don’t want to react after an event frantically weighing the pros and cons when a little bit of planning could have saved you plenty of heartache, headache and a lot of money.
Here are a few crucial steps to help ensure you are prepared for an eventual insurance claim for property damage:
Review your Insurance Policy:
The hurricane season of 2017 was the most expensive ever with over $200 billion in damages. If you owned and/or managed property along the coast from Rockport to Houston that year, you were impacted in one way or another by Hurricane Harvey. The wrinkle that some owners did not anticipate was the Army Corps of Engineers flooding that occurred for days after Harvey was gone. Insurance policies are very technical in determining what is and is not covered, and some policies did not provide full coverage for all the damage from Harvey.
Pay close attention to three main things: policy limits, deductible and replacement cost overage. Those are three simple things we “think” we know about, but the second and third categories often cause a lot of headaches. Meeting with your insurance agent before a storm threatens is the perfect time to review your coverage. You do not have to wait for renewal time to make changes to your policy either.
- Policy Limits: These are almost always set by the carrier after an inspection of the property and look at documents you submit justifying the value. Some policies allow you to increase or decrease your limits but being under-insured can create a major problem in the event of a catastrophic loss. These limits are especially important when it comes to coverage for loss of rent or business interruption coverage.
- Deductible: Your insurance broker can help you navigate options when it come to your deductible. Some options include a flat dollar amount or a percentage of your total insured value however, pay close attention to the different types of deductibles in a policy. For example, you could have one deductible for a hailstorm and a much higher deductible for a tropical cyclone/hurricane. You may also have a deductible per building, so if you have a multiple building , that could make a very big difference in whether you get paid at all on a loss.
- Replacement Cost versus Actual Cash Value: This is the main area where property owners think they are covered for a loss and find out they might not be fully covered. Most people understand that the initial loss amount paid after a storm is depreciated based on factors like the age of the structure. The differentiator between the two is that an Actual Cash Value (ACV) policy ends with that one payment, but a Replacement Cost Value (RCV) policy allows you complete repairs and recover that depreciation. As you might expect, an ACV policy has a much cheaper policy premium but could cost you dearly after a loss, so choose wisely.
Make Property Maintenance a Priority:
One of the most frequent reasons we see the denial or underpayment of an insurance claim has to do with “deferred maintenance” or the “wear and tear exclusion.” What that means is that even though a storm may impact the property, if the damaged item (e.g. roof/siding) was not maintained, the insurance company could deny the loss and claim the damage was not caused by the storm. Rather, they often claim it was poor maintenance that caused the damage. The easiest way to circumvent that argument is to create a maintenance schedule and stay on top of it.
Use Technology to your Advantage:
With the ease and affordability of digital photography and cloud storage, preparing for a disaster and insurance claim is much easier now. No longer do you need to have filing cabinets of paper files of leases, transactions, receipts, etc. as all of those are easily scanned, stored and can be backed up in the cloud. Take advantage of multiple vendors that offer cloud storage. The cost of this varies, but in most cases, 1 TB of data is often less than $100 year. You may think having it stored locally on computers is enough, but when 8 feet of water all those computers, you will wish you had the data backed up to the cloud.
Additionally, while a photo may be worth a thousand words, it is often worth much more money for an insurance claim too. Having good photos of the property condition and major mechanical items with model numbers all have a huge impact on property damage claims. It is a good idea to do an annual photo inventory of the property. If during your photo inventory you notice damage or issues, you’ll be able to stop any issues before they fester for too long.
Make an Emergency Plan:
Most claims will not result in the complete destruction of your properties, but in the event of a major loss, business operations may be interrupted for some time. You’ll want to have a plan to have non-employees ready to assist. Making a plan and having contacts ready for repairs, off-site access to files and insurance policies will help ensure a quick turnaround and hopefully minimize your damages. Interviewing a contractor or insurance claims professional can and should be done before your property is damaged.
As with everything, they key an insurance claim is to be very prepared before anything happens. If things don’t go as planned and your insurance company doesn’t properly handle the claim well, that’s a topic for a different article.
Chip Lane is a Texas trial lawyer with over years handling property insurance and business interruption insurance disputes for single-family, multi-family and commercial property owners. The Lane Law Firm, a proud supplier ember of HAA since 2016, fights underpaid and denied property insurance claims on behalf of their clients throughout Texas. Visit for more information.