Homeowners Insurance
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Homeowners Insurance
Jeanne Lipton was hard at work on her word processor in the home office of her beautiful house, located in one of Chicago's nicest residential areas. Suddenly she heard what she later described as a loud crunching sound. This was accompanied by a discomforting dropping sensation as her previously-level floors were suddenly transformed into something more like a mini skateboard park. When husband Robert breathlessly arrived on the scene he was met by a collection of building department officials, an engineer and the Lipton's embarrassed next door neighbor, Arthur. Arthur was nervously trying to explain why he had not obtained a permit before the unlicensed contractor he had hired had commenced foundation repairs to his house. And, more specifically, why they hadn't shored up the Lipton property before they started digging."Oh well" sighed Arthur, as the building department official red tagged the Lipton house, "I guess you live and learn". Jeanne and Robert did just that over the next three years. Foundation and repair estimates exceeded $170,000. Arthur's insurance company refused to pay claiming a liability exclusion in Arthur's policy. The Lipton insurers, after waiting for twenty two months for Arthur or his insurers to settle up offered only $87,500 claiming that the scope of repairs prepared by the Lipton engineers was "excessive". In the meantime, Jeanne and Robert had run out of their additional living expense coverage and were dipping heavily into their savings in order to make their rent and mortgage payments and to stave off foreclosure. They finally gave up trying to settle and filed a lawsuit. Eleven depositions, three expert witnesses, seven motions and two years later, the Liptons finally got their claims paid. Now, they could begin the long rebuilding process.
The Most Common Problems Involving Homeowners Insurance The most common problems involving homeowners insurance involve the following issues:
And many more. Disasters are almost as unexpected as the reasons behind a homeowner's claim denial.
INDEX Purchasing Homeowners Insurance
Filing Claims
Let's look at the important aspects of a Homeowner's policy, then delve into proper preparation and filing of a claim to protect ourselves from post-disaster surprises.
Purchasing Homeowners Insurance Merely having a homeowners/renters insurance policy does NOT mean you are protected. It depends on the policy. Does a given policy cover damage caused by a short circuit inside a wall? A water leak in a concealed area? Cracking in your foundation? Mistakes made by workers you hire? Damage caused by falling trees? Damage from dry rot? No insurance policy covers ALL loss caused by ANY event. Therefore, before you meet with an agent to purchase Homeowners/Renters insurance, you must be prepared. Many people do not do this, but it is very important. You need to assess:
Types of Homeowners Coverage: Dwelling Coverage, Personal Property Coverage and Liability Coverage There are three main categories of Homeowners coverage that you need to analyze:
Your Preparation Before Meeting with an Agent Dwelling Protection Coverage Preparation : Items to cover The first thing you need to do in preparing to intelligently discuss dwelling protection coverage with an insurance company representative is to make a list of the "dwelling" category items you are trying to insure. House? Patio? Garage? Pool? Landscaping? Storage building? Driveway? Retaining wall? Make a written list of these questions and issues.
The second thing to do is to estimate what it would cost to repair or replace these structures TODAY.
To estimate the amount of dwelling protection coverage needed, you should do the following:
Make sure this estimate is for "LIKE KIND AND QUALITY" MATERIALS AND WORK. Older homes often have expensive moldings and woodwork and custom cabinets, doors and light fixtures. Some new homes have marble, granite, limestone or other expensive finishes. You don't want these things replaced with prefabricated materials. Ask yourself what you need to do to assure that the estimates you have prepared are kept current with inflation and with increasing costs for labor and materials. More on this later.
Next, you need to think about the kinds of losses that pose significant concern to you. This assessment will differ from one area or region to another. Firestorms where there is a dry season, mold and mildew in areas where it is wet and humid, hurricanes in Florida, tornadoes in Kansas, hurricanes in coastal areas and floods in low-lying or mountainous areas, and so on. In addition, there are issues that could constitute a potential problem anywhere-depending on the age and condition of your house and other factors. These might include some of the things we talked about earlier. Concerns about electrical short circuits, plumbing failures, dry rot, mold, foundation problems, etc. Make a list of the kinds of issues that may prove a potential problem for you. Store all of these notes in your insurance Notebook. You will use them when you meet with the insurance agent.
Coverage for Natural Disasters: Flood, Hurricane and Earthquake Insurance Do you live in a flood plain or earthquake country? Have you adequately protected yourself from damage caused by violent storms, floods and earthquakes? Storms, tornadoes, earthquakes, floods and other natural disasters can demolish homes and their contents. It is important to evaluate your vulnerability to natural disasters and to make your insurance decisions accordingly.
Flood Insurance Do you live by the ocean? Near a river? Is your home located in a flood plain or near mountains where runoff from winter snowstorms can cause flooding? Is there a levee nearby? Floods are caused by varied and unexpected events, including hurricanes, the overflow of inland or tidal waters, the unusual and rapid accumulation or runoff of surface waters during a heavy rainfall, the collapse of a levee or dam, or a heavy snow runoff. The Federal Emergency Management Agency (FEMA), located at http:\\www.fema.gov, can tell you the level of flood threat in your area. Local government authorities can also advise you as to whether you live in an area where flood is a potential threat. Many people forgo purchasing flood insurance either because they think such damage will be covered by their homeowners policy, because they do not know where to purchase flood insurance, or because they mistakenly believe that floods will not occur in their area. Obviously, it is important to investigate your needs before the flood occurs. Damage caused by floods can be extensive and expensive, and so most homeowner policies exclude coverage for damage caused by these kinds of natural disasters. As a result, the National Flood Insurance Program (NFIP) is responsible for underwriting the vast majority of flood insurance policies in this country. NFIP coverage is only available to homeowners residing in communities where organizations or private insurance companies have agreed to participate in the program. Almost all communities with serious flooding potential have joined. To see if flood insurance is available in your community, contact NFIP at (800) 427-4661 or through its website at http://www.fema.gov/business/nfip. Many companies, possibly including the company that already handles your homeowner's or auto insurance, write and service flood policies for the federal government. The program is largely financed through the premiums charged to consumers. If you determine that you reside in a flood plain or other flood threat, contact your insurance agent or the NFIP to inquire about protection. Personal property and content coverage is separate, and you do not have to be a homeowner to purchase this type of protection. Renters can insure their belongings too. Before a flood occurs, carefully read the claims documentation, negotiation and resolution portions of this section to learn how to handle a claim should one arise.
It is a good idea to have the following items on hand in case of any disaster, including a flood: a first-aid kit, canned food and can opener; several gallons of water, protective clothing, rainwear, sleeping bags, a battery-powered radio and a flashlight. Keep all of this together in water-proof bags. Store copies of important documents, including insurance policies, wills, titles and deeds to property, birth and marriage certificates, credit card and bank account information, and an inventory of household belongings off-site in a place such a safety-deposit box or with a relative. It is a good idea to keep a videotape of the contents of your home off-site as well. Prior to evacuation, you can prepare your home. Moving furniture and other valuables to an upper floor can help protect them from water damage.
Hurricane Coverage Hurricanes may not be covered by flood policies, and they are sometimes excluded by homeowners policies too. After Hurricane Andrew, insurance companies began pulling out the marketplace because of the overwhelming losses suffered after paying claims. As a result, some hurricane-prone communities created government-sponsored insurance programs to protect insurers against catastrophic losses and to encourage insurers to offer hurricane coverage. Check with your local agent if hurricanes occur in your area.
Earthquake Coverage Do you need earthquake coverage? In order to determine whether you need earthquake insurance you should first determine the likelihood of an earthquake striking in your area, and then decide whether earthquake coverage is affordable and worthy of your investment. The problem is that effective earthquake coverage is hard to find, expensive and lacking in benefits in most places where residents most need such coverage. It’s easier to buy hurricane insurance in California and earthquake insurance in Florida than the other way around. Today, two-thirds of the earthquake coverage in effect in California is sold through the California Earthquake Authority (CEA). The CEA is a privately funded, publicly managed consortium of 15 insurance companies that was created after California’s infamous Northridge quake. The CEA's “mini-policy” is generally regarded as the industry's standard earthquake policy. Similar “mini-policies” are sold by many property insurers who do not participate in the CEA. The main problem with the CEA’s “mini-policies” is that it’s name accurately describes what you do and do not get. Numerous, important exclusions are contained in the CEA's basic earthquake policy. Another problem is that these policies generally have a 15% deductible with homeowners dwelling coverage limits, a $5,000 limit for personal property, a $1,500 limit for loss of use, and a $10,000 limit for building-code upgrades. In addition, you must pay many deductibles. When considering an earthquake policy, pay close attention to the combined effect of the exclusions, deductibles and limits under each portion of the coverage. Unfortunately, some people find that the combination of these restrictions leave little left to be paid for.
Fire Coverage Fire damage under a homeowners policy is almost always covered. This is often required by state law or insurance regulations, and is usually so whether a fire was caused by a firestorm, acts of God, someone's negligence or even by wrongdoing. The most conspicuous exceptions are fraud or arson by an insured or acts of war or insurrection. Fire Loss may even be covered if it results from an uncovered cause. For example, a flood may cause short circuits which burn a house down. Even though flood damage is excluded, damage caused by the resulting fire may be covered. Fire losses include both dwelling and apartment structure damage and personal property damage.
Personal Property Coverage Preparation When preparing to meet with an agent to discuss the Personal Property Protection part of your insurance, the steps are similar to those with Dwelling Protection Coverage.
First, make a list of your personal property. This process will surprise you. If you take a notepad and go through your house room by room, you will be shocked at how long your list is. This is time consuming, but do it! You don't have to count every sock and pencil, but go through the house thoroughly, listing televisions, stereos, tools, appliances, suits, coats, dresses, ties, rugs, tables, chairs, dressers, sofas, beds, art, jewelry, sports equipment, etc. Put it all down on your list.
Amount of Personal Property Coverage Next, list what it would cost to REPLACE these things. If you were surprised at what you actually own, you will be totally shocked at what it would cost you to replace it all.
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Get out your calculator and write down in your notes realistic replacement estimates for the things you actually own. Jewelry, Art, Coins, Stamps, Collectibles and other items of value. Highlight any personal property that may be of particular value. Especially jewelry, art, oriental rugs, crystal, silverware, antiques, collections, etc. List the value of these things SEPARATELY. In order for them to be insured, they may have to be appraised (or even photographed).
Perils Once again, list your concerns over how these things could be lost. Theft? Accident? Misplacement (at home or while away)? Fire? Write this list down and put it in your file.
Liability Coverage Protection Preparation Last, think about the issues related to Liability Coverage Preparation.
Amount of coverage What is the total value of all your current assets? Equity on your home or other property? Stocks and bonds? Retirement accounts? Any businesses in which you have a financial interest? The earnings you (and your spouse) receive from work? Autos, boats, collections, art, jewelry, anything substantial? Ask yourself, if some guest tumbles down your stairs and herniates a disc, or a neighbor's child takes a bad fall on your property and badly fractures his leg, or a worker is electrocuted while working on your circuit breaker, or a painter falls from the second story, or if some other horrible thing happens that will cost the victim or victim's family extensive loss, to what extent do you want your family assets to be at risk? Some people feel somewhat cavalier about taking some chances in life. This may be a legitimate approach. But it's pointless to insure substantial assets with an inadequate policy. Think this through carefully so you can make an intelligent judgment call.
Having developed your notes on coverage options, potential risks, and needed limits, you are ready to sit down with an insurance representative to discuss potential policies. You may be able to purchase a policy from an insurance agent, broker or directly through the insurance company. Agents are representatives of the insurance company. Two types of agents are Captive agents and Independent agents. Captive agents work for one insurance company and sell only that insurance company's policies. When you ask key questions, take notes on the answers. Keep in mind that some agents and brokers do not fully understand the specific but important details of the policies they are selling. Therefore, before purchasing homeowners insurance, make sure you are dealing with a qualified, experienced agent or broker. Ask whatever questions are important in order to assess this. Don’t be embarrassed to ask someone how many companies he/she has represented in the past; how many homeowners policies they have sold; whether they have ever been fined or sanction by any insurance regulators or anything similar. No qualified agent will ever take offense at this. Show the agent a copy of the InsuranceConsumers Bill of Rights and ask whether they agree with it.
Dwelling Coverage: Questions For the Agent
Will the proposed policy cover ALL of your real property, including the home, garage, shed, driveway, fence, gate, landscaping or other things you listed? Does the proposed policy exclude any of this from coverage? What causes of damage are included in your preparation notes? Are these causes of loss included in the policy you are considering? What causes of damage are excluded from coverage (flood, earthquake, etc.)? Does the policy provide a FULL dwelling replacement cost guarantee (the company agrees to pay the cost of rebuilding the real property, even if the cost exceeds the policy limits)? TIP: Some replacement "guarantees" are not what they might seem. They merely provide a set percentage increase above the face value of the policy. Be careful. Does the policy provide FULL code upgrade coverage (the increased cost of building a home resulting from changes in building code regulations)? Based on the total value of the real property you want covered, what limits should you purchase and what deductibles do you want? Of course, the lower the limits and the higher the deductibles, the lower the cost of the insurance.
Personal Property Coverage: Questions For the Agent
TIP: Sometimes a policy will pay for the replacement cost, but only after you actually replace the specific item with the same item. If you purchase a different item, you get only the depreciated value of what was destroyed. Be certain you understand your replacement value completely. Based on the total value of the personal property you want covered, what limits should you purchase and what are the corresponding deductibles? How does this work as to specific items?
Liability Coverage: Questions For the Agent
TIP: You want the cost of defense fees to be in addition to any settlement or judgment the company must pay. Otherwise, legal fees could swallow most or all of your limits, leaving you responsible for paying a settlement or judgment out of your pocket. Who chooses your defense attorney(s) and how are they selected?
Additional Living Expenses (ALE) Many people do not know that when their home becomes uninhabitable most insurance policies require the insurer to pay for temporary accommodations of "like kind and quality." Additional Living Expenses (ALE) coverage is critical when you are faced with living in a damaged home. Here are some questions you should ask about the ALE provision in any policy you are considering:
Again, remember to keep notes on everything you are told. Always save these notes in your binder or file.
Alternative Dispute Resolution (ADR) Provisions Contained in Insurance Policies You must scrutinize these provisions very carefully. Two common types of ADR provisions are Appraisal and Arbitration.
Appraisal or Arbitration Appraisal is normally used when a dispute concerns the value of a claim. It is not usually used to determine whether a claim is covered under the policy. Most appraisal clauses call for an independent appraiser, who will assess the damaged property and determine how much it will cost to repair or replace it. Arbitration involves appointing a person to decide the dispute. Both appraisal and arbitration clauses are controversial because, even though the policyholder is rarely informed of the appraisal or arbitration clause in the policy, he or she may be giving up important legal protections merely by buying a particular policy. An appraiser or arbitrator's decision can be final, binding and not subject to appeal - even if they completely ignored the facts, evidence and contractual obligations of the parties. This is important. Always ask questions about the details of an appraisal or arbitration clause:
After you have determined the type of coverage you need, discussed the policy limits and deductibles and asked relevant questions concerning important provisions in the policy, you are ready to fill out the insurance application.
For this reason, you must carefully read all policy application questions and answers very carefully. If you are unsure of the meaning of a question, ask the insurance company or agent and note any significant response on the application form. Do not sign the application until you have completed the application and checked it again for accuracy. After you sign the application (usually under penalty of perjury), photocopy the application and keep the copy in your insurance binder or file. TIP: Some types of insurance contracts contain an Incontestability Clause, which means that the insurance company cannot deny a claim based on a material misrepresentation on the application after the policy has been in effect for a specified number of years (usually two or three). Ask if the policy you are considering has such a clause.
A Homeowners/Renters insurance "policy" typically consists of the application; a declarations page; a definitions section; the insuring agreement; exclusions and limitations sections; policy endorsements; "your duties in the event of loss" section and an arbitration or appraisal section. The first section is usually the dwelling protection portion, followed by personal property. Liability is usually last. As with all types of insurance, you really should insist on seeing a copy of the policy before you pay for it while you are with the company representative.
READ your policy before you buy it. If you find any misstatements or inaccuracies or you see something that you did not expect, call the insurance company or agent RIGHT AWAY and resolve the matter. Take notes on this conversation and save them in your insurance file. Do not wait until you have a claim because by then it may be too late. It is better to resolve the issue NOW than to learn later on that you are not covered.
Some insurance companies use what are called HO Forms to describe parts of the coverage they offer. These forms generally describe Dwelling and Personal Property Coverage, not Liability Coverage. You may be told particular forms cover all situations (with some exclusions), but it is important, and your responsibility, to be ask the questions you prepared even when HO forms are used.
Maintaining Your Homeowners Insurance There is little point in keeping insurance coverage that does not cover your situation anymore. Therefore, keep your insurance policy up-to-date. Have you remodeled your home? Built a new addition or structure on your property? Have you purchased new items or received gifts that should be added to your personal property or other coverage? Has anything changed on your property that poses additional risk to others or to their property? Has your property or other assets increased or decreased in value over time? Has the cost of labor and material increased significantly since you bought your policy? When circumstances change, notify your insurer. Some of your updates may not modify your policy or change your premium at all. They simply put the insurance company on notice, and verifies they are aware and have agreed to cover it. Other updates may require you to modify your old policy, purchase a new one or add an endorsement.
Once you have been issued an insurance policy and paid your first premium, your Homeowners/Renters insurance coverage begins. Your coverage should continue in effect until the anniversary date of your policy or until the policy says it will end. Before the insurance policy expires, the insurance company should send you a notice of renewal. Usually, you can renew your policy by simply continuing to pay the premiums. Be sure to read the notice of renewal in case the insurance company requires you to do something more. Before you decide to renew your policy, re-read it to see if it should be updated. And to see if there have been any changes or reductions in your coverage.
The insurance company may also elect NOT to renew your policy. It can often do this for any reason. However, most states require that the insurance company give you adequate notice (usually 30-60 days) of its decision not to renew. This is intended to provide you with time to purchase replacement insurance elsewhere.
Again, save all copies of prior policies, whether they were with the current company or someone else. Keep these in your binder or file. They can wind up being very important.
Generally, you may cancel your insurance policy at any time and for any reason.
In contrast, in most states the insurance company may only cancel your policy before the anniversary date if:
If the insurance company cancels your policy because of a premium lapse, it may decide to reinstate you if and when you do pay your premium. If it does reinstate you, may still not have been covered during the period of non-payment. This means that the insurance company may refuse to pay a claim that arose during the lapse.
Homeowners/Rental Insurance Claims Hopefully you will never suffer a serious loss, but if you do, remember that the insurance company's duty is to verify your claim is legitimate, fair and falls within the perimeters of your policy.
Preparing BEFORE Submitting a DWELLING OR PROPERTY LOSS Claim If you have suffered a dwelling or property loss, take the following steps: First, notify the insurance company of your loss. Do not go into specifics at this time. Wait until you have had time to review what occurred and to re-read your policy and these materials. Safeguard your property ("Mitigate the loss"). You should take steps to protect your property from further damage. Otherwise, any additional damage may not be paid for by the insurance company (they would still have to pay for the original damage). For example, if a wind storm blew out a glass window, cover the windows with heavy plastic, tarp or boards to prevent the inside of the home from further water or wind damage. Likewise, after a fire, relocate undamaged clothes or furniture to prevent or reduce damage. Document your loss carefully. Use photographs, contractor bids, expert reports and appraisals. Never discard damaged or destroyed property unless you have received written authorization to do so from the company. Keep careful records, including notes of conversations with insurance representatives and letters to and from the insurance company. Never send intemperate letters or make offensive or insulting statements to insurance company representatives. Preparing BEFORE Submitting a Homeowners LIABILITY Claim When you believe a claim or lawsuit may be filed against you, you should do the following:
Promptly send the insurance company a WRITTEN "Notice of Liability" letter, which states that you believe a claim or lawsuit may be filed against you. Include the date, time and location of the accident and the name, address and telephone number of the person who may file the lawsuit. Keep a copy of this letter for your records. Keep careful records, including notes of conversations or correspondence with insurance representatives or others.
Personal Property Damage Claim
If the amount of your coverage on these or any coverages was insufficient, whose fault was it? If it is the insurance company's fault, add up what it would have owed had the coverage amount been proper and include this in your demand.
Dwelling Protection Coverage Claim A dwelling or other real property loss claim is really determined by two steps. Step one is what are the things that need to be done. This is called "Scope of loss." Step two is how much will it cost to do each of these things. This is called a "bid." It is important for you to use your own trusted experts, contractors, engineers, architects, etc. An insurance company's experts may find it necessary to make assumptions, which may or may not be accurate. In addition, there is a big difference between a contractors "estimate" versus a "bid" to actually do the work. It is easy to give a low estimate if you are then required to do the work. Always make certain that a bid is for like kind and quality materials and workmanship that is comparable to what you had. Custom baseboards, granite counters, mortered showers, brass fixtures, antique lighting units, solid doors, wool carpeting, etc, are all much more expensive than substitute counterparts. This can make a difference of tens of thousands of dollars and more. It can also make a huge difference in the finished value of your home. Be very careful with putting together these bids. For a list of reconstruction experts in your area who will provide you with free bids, click any of the following: general contractors, architects, engineers.
ALE Claim Assess the total cost to you of obtaining substitute (like kind and quality) rental accommodations for the time necessary for you to stay out of your home. Check your ALE coverage, noting any applicable limits on that benefits.
YOUR DUTIES When Submitting a Claim Dwelling and Property Damage Claims If you are submitting a Dwelling Protection or Property Damage claim, send the insurance company a "Notice of Claim" letter. Include your name, policy number, the date, time and location of the accident, a general statement of what happened, and a copy of any estimates, bids, or scope of loss that have been prepared by you. If you are requesting ALE expenses, you can put this in the letter too.
If a lawsuit has been filed against you and you are submitting a liability claim, send the insurance company a "Tender of Defense" letter. This letter should include your name, policy number, the date, time and location of the accident, a general statement of what happened, the names, addresses and telephone numbers of any victims and witnesses, and a copy of the suit and/or any documents that have been sent to you regarding the suit. The Tender of Defense letter should also ask the insurance company to:
Other duties you have when submitting a claim include:
Everything you submit to the insurance company must be precise and true. Never overestimate, misstate or exaggerate any aspect of a claim. If you do make a mistake, correct it in writing as soon as possible and keep a copy of the letter in your records.
YOUR RIGHTS When Making a Claim You have the same rights and responsibilities as a policyholder with respect to a Homeowners policy as with regard to most other types of policies. To review those rights and responsibilities, see the Insurance Consumers Bill of Rights. In virtually all states, insurance policies contain an "implied covenant (provision) of good faith and fair dealing". This means that both sides must treat each other fairly and reasonably in all aspects of the handling of covered claims. Failing to do this can result in different consequences, depending on your state. The point that is important to remember is that this duty exists and is a serious one.
What Happens AFTER You File a Homeowners/Renters Claim The insurance company must respond promptly to your claim. For dwelling and personal property loss claims, the insurance company prepares a scope of loss, which aids it in determining what property is damaged, how the property was damaged, and how much it may cost to repair or replace the damaged property.
If an agreement between you and the insurance company is reached at this point, the insurance company will either pay your claim or pay someone to repair or replace the damaged property. For liability claims, the insurance company will determine whether the suit against you is covered by the policy. The insurance company may agree to represent you, but only with a "Reservation of Rights." This means that the insurance company is not necessarily agreeing that your lawsuit is covered under the policy. Therefore they may not pay a judgment or settlement. In addition, you may later be asked to reimburse the insurance company for any legal fees incurred in your defense. If this happens there may be a "Conflict of Interest" between you and the carrier. This means that the attorney chosen by the company to represent your and the insurer's interests may be representing competing interests. In such a situation you may want to ask the insurance company to appoint a separate independent attorney who represents ONLY your interests. Getting Paid Negotiating. Alternative Dispute Resolution. Time limitation provisions. State Departments of Insurance. Negotiating is really about five things: If you have prepared and documented your claim carefully, and you know the ins and outs of your policy, you are way ahead of the game. Understand not only your position, but the company's position as well. What are they saying and why are they saying it? Are they wrong? If so, why? Exactly. What would be the most effective way of convincing them to change their position? And if not, how should you go about reevaluating your position?. Many negotiators believe you should start out with a high demand. Otherwise, you have nothing to bargain down from and you run the risk of creating an early impasse or of winding up with much less than you are entitled to, simply because bargaining is a part of the process. Others say that an unreasonably high demand creates an antagonistic atmosphere and that it is an artificial and counterproductive tactic. Either way, there is no substitute for painstaking preparation and analysis. That way, when you make a demand, you can back it up with the necessary facts and arguments. If reasonable attempts to negotiate a resolution of the claim fail, most policies either require appraisal, mediation, or arbitration. Many ADR provisions, as written by the insurance company, are expensive, time consuming to administer, and limited in what they can accomplish. While you are considering the resolution approach you wish to take, there is another thing you had better look up in the policy: contractual limitations period. Some policies contain provisions restricting your ability to recover benefits by requiring that any "claim" be filed within a certain time (typically one year) of the date of the loss (state law usually gives you one or two years from the date the claim is denied. But, if your insurance contract says something different and you signed it, then the insurance contract may control) If your policy contains such a provision, watch out. It could mean that unless you do file a claim against the company within the designated period, you lose all right to do so. Things you should not do include:
Examinations Under Oath (EUO) In some cases insurers respond to claims disagreements by demanding to take an EUO. This is a proceeding in which you must go to the office of the insurance company's lawyer and submit to detailed questioning about your claim. A court reporter is often present and/or the exam is tape recorded. You are placed under oath and grilled - sometimes for hours. Never attend an EUO without preparing thoroughly beforehand.
If the lawyer questioning you is harsh or abusive, or if you are asked questions that seem to be and invasion of your privacy, politely suspend the proceedings until you can obtain legal advice on these matters. Don't make a passionate speech on the record. Just say, "I'm sorry," and leave. Carefully search your policy for any time limitation provisions that may be imposed. Many insurance contracts contain provisions stating how long you have to file a claim or suit against the company. This is known as a contractual statute of limitations. If you do not file a lawsuit within the time period set forth, you may lose all of your rights to recover anything on your claim. For example, the policy may say that you have only X months or years from the date the claim arose, or from the date the claim was filed, or from the date the claim was denied. These would obviously create three different expiration dates. Read carefully. Whether or not a time period is mentioned in the policy, you will need to research your state's laws concerning applicable statutory statutes of limitations. Every state can differ in its statutes of limitations. Furthermore, such limitations differ depending on the legal basis for the claim. For instance a breach of contract statute of limitations may be four years whereas a bad faith suit statute may be two years, or voce versa. It all depends on your state and theory of recovery. In many states, the previously mentioned Duty of Good Faith and Fair dealing - implied in every insurance contract - allows policyholders to recover losses and damage covered by an insurers unreasonable conduct. These recoverable losses can include (depending on your state) all damages caused by unreasonable delay, underpayment or claims denial. In many states the policyholder can also seek general and exemplary damages.
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TIP: Insurance can involve a considerable amount of paper-preparation notes, notes on your meeting with the agent, promotional materials, the policy, past policies, claims, correspondence, telephone notes, claims and documents from experts. 
It's extremely important that you remain organized so that nothing is overlooked. This can make a difference of tens or even hundreds of thousands of dollars to you in the future.
TIP: Be careful! Do not accept some arbitrary number. Make sure that your house and other structures are insured for what it would actually cost to rebuild them. Otherwise, if you suffer a loss, you may find yourself underinsured by tens of thousands of dollars or more. If you want to intentionally underinsure in order to save premium dollars, do it knowingly, recognizing the risk you are choosing to take.