Did your house sustain significant damage in a storm, a fire, or another type of natural disaster? It is a very unfortunate situation that can be incredibly stressful to navigate. As you enter the insurance claims process, you may be wondering: What will happen if my house is a total loss? In this article, our New Orleans homeowners insurance attorney provides a comprehensive explanation of what happens if your house is a total loss.
When is a Home Considered a Total Loss?
Unfortunately, the damage to a home caused by a fire, natural disaster, or other issue could be so significant that the property cannot be repaired. A home is a total loss for insurance purposes if the cost of repairing damaged property exceeds the property’s actual value or if it is otherwise deemed irreparable for legal, logistical, or safety reasons. Investopedia notes that there are actually two separate categories of “total loss” for homes. Here is an overview:
- Actual Total Loss: An actual total occurs when a home is completely destroyed or damaged to such an extent that it cannot possibly be repaired. The damage is so severe that the remains of the home hold no value. The home is effectively rendered nonexistent in terms of usability and structure. For example, a home that completely burns down in a fire so that virtually nothing is left is an actual total loss.
- Constructive Total Loss: With a constructive total loss, the home is not entirely destroyed. There is something remaining, and it could, theoretically, be repaired. However, the cost of restoring it to its pre-damaged state is greater than the actual value of the home before the damage occurred. As such, it is a total loss for insurance purposes. Based on economic considerations, it makes more sense to start over than to repair the home.
What Happens if Your House is a Total Loss?
Is your home an actual total loss or a constructive total loss? If so, it is normal to feel stressed out, overwhelmed, and unsure of what you need to do to put the pieces back together. A proactive approach to the insurance claims process is a must. Here are key steps to be aware of:
- Notify Your Insurance Company Immediately: Do not wait to take action. Your insurer needs to know that your home is gone or uninhabitable. You should start by notifying your insurer about the loss. In doing so, you should provide them with preliminary details of the incident—date, cause, and extent of the damage. Make sure you have policy information.
- Secure Your Premises: Even if your home is a suspected total loss, you should still take reasonable and necessary measures to prevent further damage to your premises. You may want to cover, shut off water to avoid flooding, post a no trespassing sign on the premises, and otherwise secure the property.
- Document Everything (Very Important): Documentation is essential in a total loss claim. You need as much documentation as possible. Be sure to take photos or videos of the damage from multiple angles and highlight the areas most affected. You should also list every item damaged or lost and include descriptions, the date of purchase, and approximate value.
- Review Your Insurance Policy: Understand the coverage limits, deductibles, and what types of damage your policy covers. One key point to review is whether or not your policy provides Replacement Cost Value (RCV) or Actual Cash Value (ACV) for a total loss. RCV covers the cost of replacing your home and belongings with new ones, while ACV pays out the depreciated value of your damaged items.
- Secure Temporary Housing: If your home is a total loss, you obviously need temporary housing. Notably, if your policy includes Additional Living Expenses (ALE), use it to cover costs associated with temporary housing and daily expenses while your claim is processed. Be sure to keep receipts for all expenses to submit for reimbursement.
- Prepare for the Settlement Offer: After the assessment, the insurance company will provide a settlement offer based on the adjuster’s report. You should review the offer carefully. If it does not cover your losses adequately as per your policy, you may negotiate or dispute the amount. Do not accept less than full value. A lawyer can help you take action to seek the absolute maximum insurance benefits available under your policy.
- Rebuild and Move Forward:With full and fair insurance benefits secured, you can begin the process of rebuilding or buying another home. In some cases, people will rebuild on their very same property. In other cases, people will take the funds and secure a new home. Of course, this can be a lengthy and emotional process.
Insurance for a Total Loss Home Insurance Claim
Replacement Cost Value (RCV)
Many homeowners insurance policies provide Replacement Cost Value or RCV for total loss claims.
It is the amount an insurance company will pay to replace your damaged or destroyed property with new materials or items of similar kind and quality—without deducting for depreciation. It is the most comprehensive benefit and ensures you can return your home or personal belongings to their pre-loss condition, irrespective of their age or use at the time of the loss.
Actual Cash Value (ACV)
Some homeowners insurance policies provide coverage for Actual Cash Value or ACV. The difference is that ACV is the value of your property when accounting for any depreciation. It represents the replacement cost minus any depreciation for age, wear and tear, or obsolescence. In other words, the settlement amount may not fully cover the cost of purchasing new items or repairing your home.
Instead, it reflects the market value of your property at the time of the loss. To be clear, even Actual Cash Value can be a considerable payment in a total loss claim, but it is generally less than what would be offered by Replacement Cost Value.
Why Trust Insurance Claim HQ for Help With Your House is a Total Loss
Dealing with property damage is always stressful. It can be downright overwhelming if your home has been declared a total loss due to the extent of the damage. These are complicated insurance claims. It is imperative that policyholders are able to secure the absolute maximum available payment for the replacement cost value of their home. At Insurance Claim HQ, we are ready to invest the time, resources, and attention to detail to handle your case the right way. With a proven record of case results in a wide range of complex property insurance claims, our firm is equipped to take on total house loss cases. Your initial consultation is free of charge and carries zero obligations.
Schedule a Free Consultation With a Top-Tier New Orleans Insurance Lawyer
At Insurance Claim HQ, our New Orleans homeowners insurance attorneys are prepared to invest the time, resources, and attention to detail to handle your case with the care and attention that it deserves. If your house has been declared a total loss, we are more than ready to help protect your rights. Contact us now for a free, no-obligation case review. We represent homeowners in total loss claims in New Orleans and throughout all of the Gulf Coast region.
