Insurance companies spend billions of dollars every year in advertising, all in an effort to convince us that if our homes or cars become damaged they will be right there beside us, helping to pick up the pieces and protect us financially against loss. And that is absolutely what will happen, provided that you use a different set of thinking than most of us reasonable folks use.
I am currently assisting a homeowner in a suburb of Atlanta. They had a pipe to burst under their kitchen sink, damaging almost the entire first floor of their $400,000.00 home.
These nice people have name brand homeowners insurance. All of you have heard of this insurance company, and thousands of you have your own homes insured with them. Well guess what? If you have a pipe to burst under your kitchen sink, you can probably expect the same raw deal that my clients are getting!
The first thing that happened is that this name brand insurance company sent out a contractor to dry out their home. This contractor totally botched the job, resulting in significant damage to the bottom cabinets in the kitchen and allowing mold to grow on the cabinets and the drywall. They simply did not do the necessary work to access the water damage, relying on drying equipment to somehow miraculously dry wet materials that were covered up and not accessible to any drying effort. Obviously this contractor was looking out for the insurance company's financial interest rather than the homeowners!
Oh, but it gets better! After causing further damage to the home by sending out an incompetent contractor, this insurance company added insult to injury by refusing to pay to replace the upper cabinets, even though most of the bottom cabinets were damaged and required replacement. They even went so far as to refuse to replace the few bottom cabinets that had escaped serious injury. This means that the kitchen will now have two different kinds of bottom cabinets, and the upper cabinets will no longer match most of the bottom cabinets. Look around at your kitchen, and ask yourself if you would possibly be satisfied with that kind of claims service.
The insurance company defends themselves, saying that they don't "owe" for cabinets that have not suffered "direct physical damage," and that they owe only for a "reasonable match" of the damaged cabinets, not an "exact match." And you know what? By the exact terms of the insurance contract, that is absolutely true. They only "owe" for what is actually water damaged in my clients home, and those upper cabinets were never touched by the water.
One of the most basic tenets of insurance, however, is the Principle of Indemnificatio n. This principle states that the insured should not profit from a loss or damage but should be returned (as near as possible) to the same financial position that existed before the loss or damage occurred. The clear reality is that a kitchen full of mismatched cabinets in a nice home is simply not worth as much as the same kitchen with matching cabinets. So, after this adjustment of their claim the kitchen in my clients' home will not be worth as much as it was before, reducing the overall value of the home and making it more difficult to sell in the future. I mean really, who wants a nice home with patchwork quilt cabinets?
I know several insurance companies that would have paid to replace all of the cabinets in this claim. Not because they technically "owe" for them (they don't), but because they understand another basic tenet of insurance; that an insurance company should place the interests of the insured on an equal footing with their own interests.
The bottom line is this; insurance doesn't insure things, it insures the value of things. And the value of a cabinet, a roof shingle, a piece of carpet, or a piece of siding is very much tied to the other cabinets, roof shingles, carpet, or siding that it is installed alongside of. Install a mismatch, and you have not only reduced the value of the new material you are installing, you have also reduced the value of the other existing matching items alongside.
So what to do? How can you find out what your insurance company might do if you found yourself in a situation similar to my client?
Ask them. Send an email to your agent asking what the position of the insurer would be if you had shingles damaged on your roof. Will they replace the entire roof? A whole section? Or would they simply want to replace any individual shingles that are damaged, leaving you with a patchwork quilt roof that is obviously worth less than it was before it was damaged. Ask similar questions about cabinets, siding, and floor coverings as well. Try to get their position from them in writing, and then make a decision whether or not you want to continue to do business with them.
And if they won't tell you? Well, that's probably all the answer you need right there.
