Real Estate Matters

After home fire, ask insurer's contractor a lot of questions

By Ilyce Glink and Samuel J. Tamkin
Friday, January 21, 2011; 8:45 AM

Q. Our house caught fire at the end of last month, and the fire marshal condemned the home. We got what we could out of the house and are trying to get back into our normal daily routine.

We plan to have our home rebuilt. Our insurance representative explained to us our policy and about using their preferred contractors. We have met with one such contractor, they seem good and we have references from them to call.

Do you have an opinion on this program? Although our initial impression of their preferred contractor is positive, we can't find much consumer information on this online and think the opinion of a disinterested party would be wise before we sign up.

A. We're sorry to hear about your unfortunate event of last month. How fortunate that nobody was hurt or injured in the fire.

Working with insurance companies on fire losses can be a tricky situation, because if you aren't savvy about how you navigate the landscape, you could wind up with less money to rebuild your home.

Some insurance companies are better than others. If you have a recommendation for a contractor from the insurance company, you should use every means at your disposal to investigate the contractor. You might try the Better Business Bureau, your local city building department and any people they have referred you to. Just make sure that you are being referred to clients they most recently assisted and not people the company helped five years ago.

You should also make sure that the company is properly licensed and carries the right amount of insurance.

The reputation of your insurance company is also important. If your insurance company has a good track record for assisting homeowners, you might be in better shape than if your insurance company doesn't deal well with homeowners.

Before you accept any settlement to rebuild your home, make sure you have an independent architect or qualified homebuilder review the plans and specifications with you. You are building a new home. You need to know what will be included in the price tag and what you'll have to pay for outside of the insurance proceeds. Your perception of the end product may be quite different from what your insurance company and its contractors believe should be the end result.

There are experts out there who can help you go through the process, and you may well want to find one to help you. You also need to understand the terms of your insurance policy before you sign on the dotted line. You need to know what responsibility your insurance company will have to rebuild your home, to what extent and with what finishes.

Some insurance policies will limit the extent to which a home will be rebuilt. Some of these limits may arise because of the age of a home. If a home was built 100 years ago, the home built now may require differences in construction materials, layouts and other life and safety improvements. All these changes may cost more money, and you need to know whether your policy will cover the changes before you start reconstruction.

Once you know more and understand what you are getting, you'll have a better idea if the contractor will act on your side, or if the contractor is trying to meet the budget set by the insurance company. Your insurance company's budget may not be good enough for you, and you may need to get other estimates to make sure that the home is built as you would have expected.

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