Should You Accept Early Insurance Payments?
Experiencing a fire loss is an emotionally and financially draining ordeal. The aftermath can often feel like a maze of insurance claims, temporary living arrangements, and the daunting task of rebuilding. Amid this chaos, receiving an early insurance payment, like an advance, can provide immediate financial relief. However, many homeowners are hesitant to accept these initial funds, fearing it might compromise their ability to secure a fair settlement later. Let’s dispel this myth and provide clarity on why it’s okay—and often advisable—to accept and deposit these early payments from your insurance company.
Early Insurance Payments: What Are They?
Following a fire loss, insurance companies often provide homeowners with an advance against their total claim settlement. This is not a final payment but rather an immediate relief fund to cover urgent needs such as temporary housing, clothing, and food. It’s important to understand that this is part of your rightful coverage and is designed to help you through the initial recovery phase. Let me also add that the initial check an adjuster might give you at your first meeting is typically going to be between $,1000-$5,000. If they don’t offer you a check to help with your unanticipated expenses at your first meeting, ask them for one. 95% of the people I meet get some money within days after they have experienced a loss. Don’t think that the adjuster assigned to your claim is doing you a favor. They’re not. An advance is customary, not rare.
Why You Should Accept Early Payments
Immediate Financial Relief: The primary reason to accept these funds is to alleviate immediate financial pressures. Fire losses can disrupt your life significantly, and having access to cash can help you manage day-to-day expenses during this turbulent time.
No Strings Attached: These advances are exactly that—advances on your eventual claim settlement. They are not final payments and accepting them does not prevent you from furthering your claim or receiving a higher settlement in the future.
It’s Your Money: Remember, you’ve paid premiums for your insurance coverage, and this payment is part of the protection you’ve invested in. Utilizing these funds does not grant the insurance company any additional rights or leverage over your claim.
Any advance given to you within days of your loss is not “free” money. The adjuster earmarks that money usually to the Personal Property part of your claim. As you spend that money on food, deposits for housing, rental of furniture etc… you should get receipts showing the purpose for those type of expenditures. As you send those receipts for Additional Living Expenses (“ALE”) into the adjuster (send them the original and make a copy for yourself) they will then credit the Personal Property of your claim for those expenses while simultaneously charging them back to your ALE coverage.
How to Manage Early Payments
Document Everything: When accepting any payment, ensure you receive and keep detailed documentation from the insurance company. This should specify that the payment is an advance and not a full and final settlement.
Communicate Clearly: Maintain open communication with your insurance adjuster. Make it clear, and in writing, that you understand this is an advance and that you reserve the right to continue your claim process for additional damages or losses discovered later.
Keep Records: Use the funds for necessary expenses related to your loss and keep meticulous records of how you spend the money. This transparency can be beneficial if there are questions about your expenses related to the claim. I always recommend to clients to keep a big envelope in which to keep all relevant receipts and a binder for all sorts of documents if you are not digitally inclined.
Consult a Professional: If you’re unsure about the process or how accepting an advance affects your claim, consult with a professional. A Public Adjuster specializing in insurance claims can offer valuable guidance.
Payments Associated with Initial Structural Estimate: Even if the insured disagrees with what has been offered and plans to fight for the money they feel they are rightfully due, accepting the money based on the first written estimate does not stop you, the insured, from continuing the fight down the road. It is ok to accept these monies and deposit them in your bank account. The only thing an insured should be wary of in this regard is signing what is called a “full and final release”. This document would prevent you from furthering their claim.
Final Thoughts
In the aftermath of a fire, it’s essential to focus on recovery and rebuilding. Accepting early payment from your insurance company is a legitimate, safe step towards that goal, providing you with necessary financial support without compromising your rights. Remember, you are not alone in this process, and there are resources and professional public adjusters who can help you navigate this challenging time. Accept the help you’re entitled to and focus on moving forward, one step at a time.
If you have any questions about any of the above, I can be reached at conor@franklinpropertyclaims.com.