Contractors in New Jersey, New York and Connecticut are in high demand after the devastation caused by hurricane Sandy. To a lesser extent Massachusetts and Rhode Island saw some damaging winds and rains. Contractors seeking to do insurance repair work should learn about the nuances before taking on this kind of work. This work can be profitable and the money from a claim can lead to additional opportunities. There are a few things to consider before taking on insurance work:
Before spending time on an estimate for insurance repairs verify that the work is covered in the policy.
Flood claims: damage from storms is often covered by homeowners' insurance however in the case of flooding a separate flood policy must be in place. Homeowners without flood coverage will get no money from the insurance company. They will have to depend on government assistance or personal resources. If you are a contractor seeking to secure insurance work make sure there is coverage for the sustained damages.
Fire damage: On a recent claim I did a construction insurance estimate and proposal for a coaching client and found out during the policy review that the homeowner did not have coverage for Code Upgrades. It turns out the insurance company policy excluded the endorsement. Luckily the homeowner had a good settlement on contents so they could use some of the funds to rebuild their home to code.
Storm damage: Most policies cover storm damage such as wind, trees falling on houses, ice dams and leaks. However there are variances that can confuse homeowners and contractors trying to discover what is covered and what is not. For example when a tree falls on a house the cost of removing the tree from the house is covered while the removal of the tree and limbs is limited to a specific amount. In this case the homeowner should request that an invoice for the tree removal be done separately from an invoice to dispose of the tree and limbs. The full invoice for the tree removal off the house is covered under mitigation where the debris removal is capped at usually $500.00.
Dealing with the adjuster and the insurance company: be nice
Insurance companies will send out an adjuster to review a claim. This person may be an employee of the company or they may be a sub contractor. It is not unusual that you would get and adjuster with no construction experience right out of college. Most subs tend to have some or a lot of construction experience. It is important to recognize that these individuals have a job to do and treating them politley is usually a good thing. Often times contractors beat the bleep out of the insurance adjustor leading to lower settlements and delays. I have found in the process of handling hundreds of claims honey goes a lot further than vinegar.
A good way to start the process, after you verified that there is coverage, is to meet with the adjuster on the claim before you do the estimate. At this walk through seek to define the scope of work with the adjuster and confirm what he or she will cover. In the event you disagree with an item let him/her know that you may include it in your estimate. This way it is expected and not a surprise. I have found that this approach leads to a more fruitful negotiation and final settlement on scope and price. Note that the adjuster may not have final say until it is reviewed and approved by the insurance carrier.
Estimating the claim; the standard line for insurance claims is 10% overhead and 10% profit. Remember that NO ONE can do remodeling work at this rate unless you want to buy the job or work for free. It is important that you use an estimating format and hold the line on your normal pricing. The insurance company adjuster will be using a standardized pricing program to estimate the damages. You need a strategy and system to defend your estimate and method of coming up with your amount. The yellow pad and pen or WAG (wild a** guess) estimating system is unreliable and inefficient. I use a simple excel spread sheet format pre loaded with the proper percentages and margins. This strategy allows for quick revisions when negotiating a final amount with the adjuster.
The money: before agreeing to contract for the work make sure you and the homeowner know who is going to be paying the bill and how, when, where and who to the money flows. If a bank is involved there are a lot of steps. You need to understand terms like Depreciation, ACV, RCV, Ordinance or Law, Incurred, ALE and more. I will cover these in a coming post.
Are you ready for the winter, storm and fire damage season?
In the winter there are four common claims are you ready and do your customers know who to call when damage occurs to their property?
- Ice dams
- Frozen pipes and the ensuing pipe burst
- Weight of ice and snow causing structural collapse
Now would be a good time for your marketing department to write a newsletter to let all your customers know how you can help them in the event of damages. Or you can write a blog post, put something on your facebook page, develop a flyer to handout or even make a phone call to your clients.