Landlord Insurance Claims

Welcome to another episode of Invest Smart with Steadily. I'm CJ Long, and today we're going to be covering a topic that most landlords don't know a ton about: the insurance claims process. As we go through each step, we're going to cover what to do when you get that dreaded call from your tenant saying there's water everywhere and a pipe just burst in the bathroom.

First up, that frantic phone call. It's going to be important for you to remain calm and help your tenant take immediate action. Ask them to shut off the main water valve if they can safely do so, and move any valuables away from the water to prevent further damage. You as the landlord need to know where the main water valve is and how to shut it off. A pro tip here is to provide tenants with an emergency guide when they move in that shares the location of the valve, emergency contact information, etc.

Step two and three are going to go hand in hand, but I'm going to talk about them one at a time. Step two is mitigation and temporary repairs. Most policies are going to require that you take steps to mitigate any future damage — this is a critical step. This could involve having a plumber replace the burst pipe or having a tarp put on the roof to prevent storm damage. While there may be certain exclusions for wear and tear related to the pipe bursting, most policies do cover costs for reasonable emergency measures in order to prevent future claims. Regardless, taking steps to prevent future damage is going to be a requirement under most policy contracts, and failing to do so could impact coverage for the loss.

So in that pipe burst example, it's never going to be a good move to let water sit for days unaddressed without contacting a mitigation company. Water doesn't get better with time. Make the necessary phone calls, get the process moving, and last but not least on this step, make sure you're taking photos, documenting damages, and retaining any invoices or correspondence associated with it.

The next step is step three: reporting the claim. Remember, this goes hand in hand with step two. You need to report the claim to your insurance provider as soon as possible. In Steadily's case, we allow for claims reporting both online and over the phone. Make sure you're checking with your specific insurance provider as to how they accept claims reports. On the initial report you're going to provide information about what occurred, what all is damaged, and you're also going to outline any other information pertaining to the loss itself — maybe the tenant is displaced and you're missing out on rent, maybe the plumber already came and replaced the pipe. You're going to provide those specifics as well.

You're also going to have an opportunity here to send in all photos, invoices, plumber reports, mitigation reports — whatever information you have regarding the steps you took in step two. Most claims adjusters are going to proactively provide you with information on how to send that in. Specific to us at Steadily, we're able to receive that information via text, email, whatever is the best route for you.

Coming up on step four: the adjuster's inspection. Once your claim is filed, you're going to have a claims adjuster assigned to your claim. Sometimes that adjuster will be the individual physically coming out to inspect the property; other times they will assign a secondary adjuster or a field adjuster to come out. Either way, the purpose of this is to schedule an inspection in order to write an estimate. The adjuster is going to contact you and schedule an inspection, typically taking a few days from the time you first report it.

For a landlord, something to keep in mind here is that availability and communication matters. Sometimes as a landlord you may be local to the property and it's easy for you to get by for the inspection; other times you may be states away and you have a property manager involved. It's going to be critical that whoever is going to be present at the time of the property inspection has their contact information shared with the adjuster so that the property can be inspected promptly. During that inspection they're going to evaluate the damages and take photographs. If you've got any physical invoices or documents, this is a great opportunity to provide them at that point.

There will also be some opportunities where your provider may allow you to do a virtual inspection using a mobile application, where you or the property manager can photograph the damages yourselves and then an estimate can be written off of that.

Moving on to step five: reviewing the estimate and the settlement offer — the time where the money comes. After the inspection, the adjuster is going to provide an estimate of the repair costs. They're going to review the damage, the labor associated with the repairs, and any materials needed to restore the property to pre-loss condition. Once this estimate is complete, the adjuster typically will also review the policy and ensure that coverage applies. Coverage is applied based on the cause of loss and what is damaged, and often times a coverage determination can't be made until after the inspection is completed and a cause of loss is appropriately determined.

For example, going back to the pipe burst scenario — in a water loss there is a difference in coverage between a loss caused by a pipe bursting versus groundwater entering through the walls of the basement. The pipe burst, or the ensuing water damage relating to the pipe burst, is generally covered, whereas water damage as a result of groundwater coming into the basement generally is not. So it's important to understand that often times a coverage determination can't be arrived at until after the inspection is completed. Once this is done, the insurance company is going to offer a settlement amount based on the policy coverage limits and the deductibles.

Step six: completing the repairs and finalizing the claim. Payments are issued and it's time for repairs to start. Depending on your policy, the insurance company might issue a payment directly to you, or if there's a mortgagee it will likely be a two-party check. Often times this is a point of contention in the claims process, but one thing to know is that if you have a mortgage on your property, the mortgagee has a financial interest in that property. As such, when a payment is issued to repair damages, the mortgagee's interest must be protected, and that is why a two-party check is often times required in these instances.

As you go through the repair process, keep in mind that any additional damages that are discovered need to be reported to your adjuster immediately — they may need to reassess and adjust the claim accordingly. If you notify your contractor and provide them with the claims adjuster's information, often times the adjuster can work directly with the contractor to resolve any discrepancies. If the estimate seems too low or if there are discrepancies, make sure you are letting the adjuster know prior to proceeding with repairs.

And there you have it — a step-by-step guide to navigating the landlord insurance claims process in the event of a burst pipe or any other loss that may happen to your property. While dealing with an insurance claim can be stressful — trust me, I know, I've had some of them myself — knowing these steps in advance can help you handle the situation with confidence. Make sure you're taking the steps you need to get your property back to normal as quickly as possible. Thanks again for tuning in to Invest Smart. If you found this episode helpful, don't forget to subscribe below and leave us a review. And as always, stay informed and stay protected with Steadily.