Beware of Completion Dates!
In the wake of an insurance loss, the policyholder has certain contractual obligations under the terms of their policy. It is important to know and understand these obligations. These include protecting your property from future losses (completing temporary repairs, as possible, until the damage can be evaluated by your carrier) as well as a timely notification of loss (as quickly as possible, but usually with a 12-month notification window wrapped around the date of loss).
The property owner responsibilities, however, do not end once a claim has been filed. They continue throughout the claims process. One of the least understood–and potentially problematic–responsibilities has to do with completion dates. The insurance carrier sets a calendar, or window, around the date of loss, by which time all repairs must have been completed. These timeframes are to ensure that policyholders both have sufficient time to restore their properties, but also to ensure that work is completed so claims are not held open indefinitely.
What is at stake is the Depreciation (aka, depreciated hold back) on the claim, Depreciation is the policy term used to describe those funds which are held back in the initial settlement with the policyholder,T based on the age and condition of the items affected, until the repairs have been completed. These funds are kept in an escrow account under the claim number and must be applied for at the culmination of repairs. Depending on multiple inputs, the amount of Depreciation (depreciated hold back) varies from 10%-40% of the combined value of the repairs.
It should operate in a very straightforward fashion. The value of the claim is established. The first check is cut. The Depreciation is held back until the work is completed. Upon completion, it is released to the full value of the repairs and the claim is closed. If the work is not completed by the completion deadline, the depreciation (depreciated hold back) is never released.
“Whenever you find yourself in a loss situation, and find that you must file a claim, it is IMPORTANT that you now ask what the completion date is for your carrier relative to this particular loss”
Of course, things are never that simple. The Completion Deadline has historically been 2 years from the date of loss. In my experience, this 2 year windows was the deadline used across carriers and across states, and operated as the industry standard.
In recent years, however, different insurance companies have reinterpreted the Completion Deadlines within their administrative policies in a post-loss claim situation. I have seen it change from 2 years, to 18 months, 12 months and even as few as 6 months! Respective insurance companies argue that it is their prerogative to establish the policies and procedures around the claims they process. One might also interpret these changes as a cost-savings measure adopted to reduce expenses within claims, and poorly communicated to their policyholders.
Whichever your opinion, one thing is clear: You must know your work completion dates when you file a claim!
So what does that mean for you? Whenever you find yourself in a loss situation, and find that you must file a claim, it is IMPORTANT that you now ask what the completion date is for your carrier relative to this particular loss. In doing so, it will help frame your timeline for repairs and avoid the unpleasant situation of missing a deadline and putting your Depreciation (depreciated hold back) funds at risk.