Looking Out for No. 1 Before and After the Fire
By DALE BUSS
Published: December 4, 2005
ONE Sunday afternoon in March, my family and I drove up to our suburban Detroit home to find four fire trucks, two police cars and all our neighbors surrounding our house. It was the beginning of a financial, logistical and emotional ordeal that's still not over.
An electrical fire that started in our finished basement created smoke and soot that permeated everything in the house and asphyxiated our dog. Our home's infrastructure - plumbing, heating and electrical systems as well as most of the wall board - and almost all of our furnishings need to be replaced. We're living in a rental home nearby, and hope to move back into our restored home in the spring - about a year after the fire.
About 400,000 Americans suffer a residential fire each year, and few are prepared for it. Only 37 percent of Americans could correctly answer 6 of 12 basic questions about their homeowner and auto insurance policies in a survey last year by Fireman's Fund Insurance.
When fire strikes, this lack of preparedness can have dire consequences. Yet, with foresight in buying insurance before a fire, and presence of mind after a fire, homeowners can have more control over the pace and scope of their recovery.
"You have to treat insurance renewal like the really important moment it is, and most people don't do that," says J. Robert Hunter, director of insurance for the Consumer Federation of America in Washington.
The first thing to do is buttress your homeowner policy. Make sure you get "replacement cost" coverage of the structure and your possessions, not simply a policy that will pay you only their "actual cash value" at the time of the fire. You can also buy additional extended or guaranteed replacement-cost coverage for the structure only, which can help if there have been substantial increases in the price of lumber or other building materials. On a $500,000 home in the Midwest, for example, replacement cost coverage might require about $250 more a year more than actual cash value coverage. Not all insurance policies will pay for upgrades that may be required by changes in local building codes since the house was built. "Some policies have some of this coverage built in, but usually it's an option now," says Matthew Cullina, a manager for MetLife Auto and Home Insurance in Warwick, R.I.
And if you've recently added a room or some major amenity, augment your coverage. "People get caught by the high cost of home-theater systems they've added but not adjusted insurance for," says Robert K. Myers, president of GAB Robins, in Parsippany, N.J., a bureau of independent adjusters who work for insurers. A rule of thumb is that it costs about $2 a year to add $1,000 in coverage of living space; a typical room addition that cost $50,000 to construct could be covered by an additional $100.
Watch for loopholes that favor the insurer, too. Get your agent to override them, or find another insurer. Our policy, for example, allowed only 180 days from the fire to clean or replace the entire contents of our home, even though we're still not back in our house more than eight months later.
Some policies provide strictly limited coverage of business losses in a house. For the growing number of people who work at home, like me, such restrictions can be a huge handicap.
You can review your choice of insurance carrier by going to the Web site of the National Association of Insurance Commissioners (www.naic.org), naic.org which provides information about consumer complaints, company by company.
Just as important as any policy, though, are steps to take to make sure a fire does as little damage as possible. Electronic alarm services, which typically cost $25 or more a month, can notify the local fire department quickly enough to make the difference between a partial or total loss of your home.
And more homeowners are now installing automatic sprinkler systems. "They're not that expensive anymore, and you can get a premium discount for having one," says Michelle Kenney, senior director of personal insurance underwriting for Fireman's Fund, in Novato, Calif. Sprinkler systems cost from 90 cents to $2.50 a square foot for a typical dwelling, depending on whether the house is new or being retrofitted.
Recovering from a fire will be easier if you have compiled a household inventory. Many people are daunted by the idea of cataloging everything they own just to substantiate a hypothetical insurance claim later. But the process can be as simple as using a camcorder or digital camera and taking pictures of rooms, opening dresser drawers and shooting their contents, and providing details only for individual items that are unusual or expensive. Put the tape or disk in a safe-deposit box or your desk at work.
After a fire, call your insurance company, which will immediately assign you an adjuster. The adjuster will authorize payments and will dispatch a contractor right away to secure the property. You will want to confirm what "additional living expenses" your policy covers.
Typically, a day or two after the fire, the adjuster will tour your home with some recommended contractors to handle reconstruction and, if it isn't a total loss, begin salvaging your contents. But don't make commitments right away: the fire has done its damage so get estimates from your own contractors and compare them with those from your adjuster's suggested vendors. Any payments for contractors' services or materials are deducted by the insurance company from the total amount of coverage in your policy.
And don't be surprised if you're questioned by a local fire inspector, the insurance company's own fire investigator, or maybe the police. As many as a quarter of house fires are arson, according to the National Fire Protection Association, so such questioning is routine.
In the end, insurers want to satisfy fire victims, who are their customers - but not for any higher cost than necessary. Often, a settlement comes down to grueling negotiations between a homeowner, whose material well-being may be at stake, and an insurance company. Be a tough negotiator.
Still, it is easy to make mistakes. For example, we quickly signed a contract for cleaning of our "apparel." But, to our dismay, the cleaning company employees snatched every item that bore even a stitch of fabric, including doilies and stuffed animals. With its chemical-based cleaning process, the company disfigured or otherwise damaged hundreds of our garments.
We asked our adjuster not to pay the garment processor's full bill. He agreed and chopped the initial $23,000 bill down to about $13,500. After further demonstrating how poorly our clothes fared, we just recently settled with the cleaning company for $11,000 from our insurance proceeds.
But we are still arguing about the disposition of our most expensive possession, a baby grand piano. We want it replaced for about $30,000, while our insurer insists it can be restored for about half that cost.
You might want to consider hiring an advocate. "Public adjusters" are available to serve fire victims. They usually charge 10 percent of your settlement in exchange for buffering your dealings with the insurance company. Insurers disdain them as ambulance-chasers, and some states do not allow them. But they may come in handy in situations like ours, where a savvy adviser could have prevented much hassle.
A public adjuster might make sense in case of injury or death to someone in the household, which is a situation that can overwhelm a household's capacity for coping with the necessary mechanics of insurance coverage.
SETTLING with your insurer for smoke damage can be difficult, too. My advice is that you insist your insurer replace whatever items have suffered smoke damage. Smoke "permeates everything, and if it's not treated correctly, it will never go away," said Peter Duncanson, director of training for ServiceMaster Clean, a division of the ServiceMaster Corporation in Memphis, which handles fire restoration. Sometimes, something is "cleaned" and then, a few months later, the chemical cleaner wears off and it can begin smelling like smoke again, some cleaning specialists say.
Our fire could have been much worse. We had an alarm system that notified the fire department, which held down the damage. And the experience has led us to reorder our material priorities a bit - goodbye to videocassettes of movies, for example. We've also decided to put a fireplace in our family room - natural gas, of course.
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