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D.  Avoiding Problems with Homeowner's and Property Insurance

The average consumer spends 12 cents out of every income dollar on insurance. Often, however, people do not understand the coverage they are receiving, fall to interpret onerous clauses in their insurance contracts, and have trouble collecting insurance proceeds from their carrier.

When purchasing insurance, one of the best ways to compare policies in price and coverage is simply to call various insurance agents and ask about a particular policy. Speak to friends, relatives, and business associates to find out what they are receiving and how much they are paying. You can also contact your local state department of insurance office for information on a company's fees and any complaints filed against them.

• Read the insurance application and proposed policy carefully. Be aware of exclusions clauses, which limit the insurance company's responsibility to pay. These are typically written in bold print but are often confusing. It is essential to know what coverage you will not receive before you buy an insurance policy. For example, does your homeowner's policy provide adequate coverage in the event of a natural disaster, like a hurricane or tornado? What about damage caused from floods, fire, rain, or lightning?
• Complete the application truthfully. Companies regularly deny coverage for insurance on the basis that prior conditions or problems existed but were not revealed. This is called "material misrepresentation" or "omission."
• Pay premiums on time. Late payments may give the insurance company the opportunity to deny a claim or cancel your policy. If the premiums are too expensive, consider obtaining a policy with a higher deductible rather than buy less insurance.>
• Maintain a complete inventory of all belongings insured for homeowner's and property insurance policies, and keep a separate copy outside of your home. In fact, experts suggest that it is a good idea to have a video or pictures taken of all possessions you wish to be covered. Better still, draw a floor plan of each room of your house and include in the plan the contents of each room.
• Save your sales receipts to prove the value of covered property.
• Review your insurance policy regularly to determine if gaps exist because of changed circumstances. For example, should you buy replacement-cost coverage, which pays to replace the home without regard to its age or condition, or the standard actual cash-value coverage, which is cheaper but pays just the replacement cost minus depreciation? The most expensive policy to obtain is guaranteed-replacement cost coverage, which will compensate you to rebuild your home even when the new cost exceeds the value of the policy.
• And unless you purchased a rider to the policy (sometimes called a floater) for personal possessions and valuables-including expensive jewelry, furs, and paintings-you may not receive anything near the value of these items from the policy upon their loss.

• Never file false claims or exaggerate your loss.
• Contact your adjuster before filing a claim to determine what you are entitled to under the policy and the best way to prove the extent of your losses.
• File a claim immediately.
• File a police report immediately in the event of an accident, theft, or break-ins; the report will be evidence and proof of your loss when filing an insurance claim.
• Take photographs of damaged property before and after it is repaired. It is also a good idea to take color photographs of recent injuries when filing accident claims and disability claims.
• Maintain complete records of repair and replacement costs, medical bills, and so forth. Pay by check; the canceled check will serve as proof of payment.
• Save all repair estimates, bills, receipts, proof of payment, and pertinent documents.

• Contact your insurance company immediately in writing if you have difficulty collecting on your policy. Draft the letter carefully since it may be used as evidence of the insurance company's lack of diligence in handling your claim. In fact, it may be wise to have an attorney analyze your case and write the letter if a large amount of money is claimed.
• Seek legal and other professional advice if your insurance company refuses to pay for your loss. Insurance companies frequently err in their analysis of written policies and their duty to pay the customer for a loss covered under a policy, including payment for repairs made to avoid further damage or for reasonable living expenses if the property is unlivable due to the damage caused by a storm or natural disaster. As a last resort, you might consider filing a lawsuit based on breach of contract or negligence.
• File a grievance with your state's insurance department. Most state insurance departments investigate complaints against insurance companies, brokers, agents, and adjusters, and many attempt to mediate disputes regarding premiums, coverage, and renewals. When amicable attempts to resolve matters fail, these agencies can commence formal investigations and hearings on a consumer's behalf, particularly when a certain aspect of an insurance company's conduct has affected many consumers (a class action).
• Hire a public adjuster to help you prepare your property damage claim. For a fee (up to one-third of the additional money recovered through their efforts but usually up to 10 percent of the amount received), public adjusters often interpret your policy, secure estimates, and take inventory 3>of your losses. They may be worth the money in difficult situations where a substantial sum is involved. Since fees vary, negotiate the fee to be paid; some adjusters may even accept an hourly rate. The best public adjusters typically belong to reputable associations such as the National Association of Public Insurance Adjusters. Obtain references, detailed work experience, and professional affiliations before hiring the adjuster, and demand a written agreement that states fees to be charged and services to be performed.

Never automatically accept an unfavorable insurance company decision if you believe the denial of your claim was unfair. Acceptance may constitute settlement of the claim in full.

Locating an Insurance Company That Has Gone Out of Business

Visit the company's previous location to see if there is a sign for a new address. Check with nearby firms and the building landlord to see if they know of the company's whereabouts.

Send a certified letter, return receipt requested, to the firm at its last known address. The return receipt will show if the letter was forwarded and to whom it was delivered.

Call the post office and telephone company for any forwarding instructions.

Contact the federal bankruptcy court in the county where the main office of the company was located to learn if the company filed for bankruptcy.