It is getting pretty redundant and somewhat annoying to hear insurance companies complain that they want the homeowners to repair their house and don’t want to write checks for settlements. Every insurance adjuster and every lawyer representing them seem to think that every homeowner that files a sinkhole claim makes a big pay day, pays the house off and lives in the lap of luxury for years to come. This is all just not true. Lets cut through the crap here people and finally talk about the truth.
When a homeowner has a mortgage, the mortgage company will almost always be involved in the settlement and that mortgage company will almost always require the home to be repaired with the settlement money. So first and foremost, lets put the rumor that homeowners never fix their house to rest. If a homeowner has a mortgage, they are almost always required to fix their house. Furthermore, most of my clients realize that they need to repair the home for the market value and the safety of their family. Most of my clients do repair their house after we settle. The difference is homeowners get to fix their house the way they deem fit. Is it really fair for the insurance company to come in with their chosen experts and force you to fix the house the way they tell you? Under what other scenario does that happen? The insurance company is not living in that house in ten years. Once a claim is settled the homeowner assumes all the burden of that house and what may happen in the future. They also assume the lost value of that home and want to do everything they can to protect their long term investment. The insurance companies do not care about these issues and the law does not properly compensate or protect homeowners for the long haul.
I have heard insurance companies tell my clients, hey fix the house and if you have trouble later we will come back out. Raise your hand if you are a homeowner who filed a sinkhole claim only to be dropped by your carrier at the first opportunity. Lots of hands going up. Now raise your hand if you filed a sinkhole claim, were dropped by your insurance company and were able to find sinkhole insurance with another insurance company. All the hands go down.
Plain and simple fact is, whether they fix the house the insurance companies way or get a settlement and fix it their way, these homeowners are on their own once they file a claim. Who can blame them for wanting the most long lasting proven repairs or to ensure when more problems occur and they aren’t insured anymore, they have money left to fix it. Grout typically has a 5 year warranty, underpinning typically has a lifetime warranty. Pavers around a pool or driveway may be better able to withstand continued movement but can be more expensive than concrete. Septic, plumbing and roof issues may come about that the insurance company think are not related. These are typical issues we see and hear and unless a homeowner has the cash in hand to do the repairs themselves, they are stuck. The truth about these claims is they are rarely about money and more about flexibility. The insurance companies offer absolutely zero flexibility to a homeowner.
So we have dispelled the myth that no homeowner ever fixes their house. Now lets look at the thought that homeowners who get settlements get some big financial windfall. If a sinkhole home is un-repaired, it typically will lose about 80% of its value and will be un-sellable on the common market. So if a homeowner does pay their mortgage off instead of repairing it where is the victory? They can’t sell that house ever again for anything over pennies on the dollar. They can’t benefit from any capital gains from a sale so they have a down payment to move up the property ladder into a bigger and better home. They owe nothing on a home that is worth nothing. Often times the “worthless” home they own is the largest investment they have ever made. They used life savings as down payments. They sweat and bled doing improvements or repairs. They saw their kids grow up and play here. Imagine how that feels to see all that go literally down the drain in a matter of seconds. How is that homeowner winning?
Now, what about the homeowner who does what the insurance company wants and fixes their house exactly to the specifications of the insurance experts. Let’s be honest, who really thinks that a sinkhole home regains 100% of its marketable value if it is repaired? Again, very few hands going up. So the homeowner who does the repair the insurance company forces on them will lose value in the home. On top of that, they will likely be dropped the next year and will have no money or help if and when future problems occur. Boy that sounds like a winner to me.
So why does the insurance company want you to fix your house instead of negotiating settlements? Let’s continue our honest trend here….they don’t. Insurance companies shouldn’t really care if you fix or not. It costs them the same amount of money and when they negotiate settlements they get a release from the claim and get to cancel the policy right away. It is actually more beneficial for an insurance company to negotiate a settlement. I am not buying this whole moral and ethical obligation to the taxpayers crap either. Insurance companies taking a moral stance over profits? Yeah right. It’s all about profits.
What they really want is for homeowners to think that their only option if they file a sinkhole claim is their way or the highway. As we already outlined, if you repair your home the insurance way, you are likely coming out a loser. The insurance companies know that and know you know that. A lot of insurance companies will tell you that up front. I have a lot of clients that told me their insurance adjuster tried to talk them out of their claim citing the fact that the home will be worthless and your premiums will go up, etc. So, if homeowners all come out as losers from these claims, they will stop filing. Public adjusters and attorneys will slowly go away. If claims stop getting filed and attorneys stop taking the cases what is left? Profits. The insane profits the insurance companies have been longing for.