How An Insurance Company Can Screw You Even If You’ve Paid
Q: Gerald, my friend had a fire in their rehab property and the insurance company is refusing to pay the claim, should he sue? Ebony, Maplewood, NJ
A: Hi Ebony, great question. The key here is the insurance policy that your friend had. An insurance policy is a contract with specific clauses. If he lived up to his end of the bargain, then the insurance company should pay and if they don’t he should go after them.
However, if one of the insurance policy clauses was violated (i.e. if the property was supposed to be occupied and was actually vacant for example) the bank may not be obligated to pay the claim. Insurance is a good business for insurers because they always get their money upfront and then decide whether they’re going to pay your claim after they’ve received all your premium payments (kind of a scam, right?).
To protect yourself, you really need to know the terms of the property insurance policy you have. I mentioned the vacancy clause because for a rehab, you want to make sure you get vacant property insurance (although it’s twice as expensive as for an occupied dwelling), you’re not saving money by misrepresenting the vacancy, you’re really just throwing money down the drain if there is a claim and the insurance company won’t pay, so make sure you know the terms of property insurance policy you sign.
Thanks for your question, Ebony. Good luck.
For more real estate tips and information, visit my blog at geraldlucas.com.