When Mother Nature Hands You a Catastrophic Insurance Claim
Your house is a wreck, but unless you know how to handle yourself throughout the insurance claims process, the disaster might just be getting started. Here are six common mistakes homeowners make during this critical time.


“These past two years, Mother Nature revealed her fury, resulting in property loses of terrifying, historic amounts,” observes a veteran of some of the most destructive fires in the Western United States, San Francisco attorney Dan Veroff, adding:
“And many insurance companies — trusted to help make families whole again — did the exact opposite, with adjusters massively underpaying valid claims. Sadly, the lack of knowledge by business and homeowners of the claims process —and steps they needed to take before the loss — magnified the harm.”
He outlined “the worst mistakes a claimant can make when facing what we call a CAT – catastrophic – insurance claim.”

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. You take whatever the first adjuster tells you as gospel
Consequences: They could misstate your rights under your insurance policy.
Insurance companies bring in an army of CAT “storm chasers” who are almost always from out of state. Rarely do these insurance adjusters have specialized knowledge or training in creating accurate estimates of repair costs, or state law as it applies to your loss.
They often tell claimants that they have less insurance coverage than what their policy provides.
Please, do not act on what they tell you without consulting with an attorney! (More on what kind of attorney in a moment, and to my readers, this is really important!)
2. You accept the first payment as being complete and comprehensive
Consequences: You will be underpaid!
In a typical case, a CAT adjuster comes out with an estimator who is in the insurance company’s pocket. They write up a “quick and dirty estimate,” in their car and cut you a check to cover rebuilding and temporary living expenses.
This is where things get sticky.
Usually, an insured will meet with a contractor who will prepare a bid for repairs, but it can take months for it to arrive and will almost always be much higher than what the adjuster has already paid.
If you had a rebuilding estimate available before the loss, you could have reviewed it with the adjuster. Now you are starting from square one, and your limited payment for temporary housing has run down further. Also, your claim has probably been reassigned to a second or third adjuster, because CAT adjusters are usually only deployed for a short period of time.
You’ve got to learn what the claim is actually worth quickly. Never count on the insurance company to do this, and always expect the initial estimate to be well below what it should be. You have a duty to yourself to question what you are told at the scene by the CAT adjuster and those who follow.
Under extreme pressure and worry, accepting what the adjuster tells you can be a costly mistake.
3. You fail to get an estimate to rebuild your home as it was before a CAT loss
Consequences: You will be at the mercy of an adjuster who will likely under-value the claim.
After disasters, it’s not uncommon for homeowners to want to make some changes to their home’s original design during the rebuilding process. The carrier is obligated to pay the cost of rebuilding your home as it was before the loss and not a different home. Yes, you can rebuild something different, but the rebuilding cost sets your maximum insurance budget. Only getting proof of the home you want to build now – with modifications and improvements and not what you had before – helps the adjuster stick with their low estimate, dispute your figures and thus underpay the claim.
So, you need to answer this question: “What will it cost to replace or rebuild the home we had, not the home we would like to build now?”
If you get this estimate from a contractor in advance — before any potential loss may occur — you will be ahead. You can also use the estimate to ensure you have adequate insurance coverage. After a disaster strikes, it’s important to get a good replacement cost estimate ASAP. At the same time as you get the replacement estimate, have the contractor prepare an estimate for the home you would like to build. As long as the cost comes in within the amount of your insurance coverage, you should be OK.
4. You fail to prepare an inventory of the contents in your home
Consequences: Unless you do this well in advance of a potential loss, you will have to create it from memory, from photos that you might be able to find, receipts, talking with family members. Who can remember all the books, the dresses and suits, the details? Lacking proof, you will not be paid.
Also, assembling this inventory in advance allows you to increase the amount of coverage for personal property so as to not be underinsured. Save the list to the cloud.
5. You hire a lawyer who is not experienced with insurance law
Consequences: Missing key deadlines and losing your rights. Getting involved in litigation for years when it could have taken months. Having the case turn out badly.
Insurance law is unique. If a lawyer tells you, “Oh, I know personal injury, divorce, tax – whatever – therefore I can handle your insurance claim,” RUN! Lawyers inexperienced with property insurance law lose cases because of their lack of knowledge.
So, look for a lawyer who primarily concentrates on property insurance work.
6. You exaggerate your loss or outright lie
Consequences: In some states, if the company can prove you have lied, they can deny the entire claim. Lie about a dollar and you lose the whole thing!
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, "You and the Law." Through his column, he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."
-
If You'd Put $1,000 Into Procter & Gamble Stock 20 Years Ago, Here's What You'd Have Today
Procter & Gamble stock is a dependable dividend grower, but a disappointing long-term holding.
-
Could This Little Known Data Shift Hurt Your 2026 Social Security COLA?
The BLS has changed how it measures the inflationary data that determines whether Social Security benefits will get a Cost-of-Living Adjustment (COLA). Will it hurt your benefits?
-
Financial Pros Provide a Beginner's Guide to Building Wealth in 10 Years
Building wealth over 10 years requires understanding your current financial situation, budgeting effectively, eliminating high-interest debt and increasing both your income and financial literacy.
-
You're Divorced, But the Work Isn't Over: A Guide to Five Financial Tasks to Do ASAP
Once your divorce is settled, don't waste time. You've got to tie up some important loose ends or risk losing money and facing tax consequences.
-
Five Mistakes to Avoid in Your First Year of Retirement
Retirement brings the freedom to choose how to spend your money and time. But choices made in the initial rush of excitement could create problems in future.
-
I'm an Investing Expert: This Is How You Can Invest Like Warren Buffett
Buffett just invested $15 billion in oil and gas, and you can leverage the same strategy in your IRA to potentially generate 8% to 12% quarterly cash flow while taking advantage of tax benefits that are unavailable in any other investment class.
-
Integrity, Generosity and Wealth: A Faith-Based Approach to Business
Entrepreneurs who align their business and financial decisions with the biblical principles of integrity, generosity and helping others can realize impactful and fulfilling success.
-
How Much Income Can You Get From an Annuity? An Annuities Expert Gets Specific
Here's a detailed look at income annuities and the factors that determine your payout now and in the future.
-
Your Paycheck Stops in Retirement, But Your Life Doesn't: An Expert Guide to Planning for a Confident Future
Social Security will replace only about 40% of your salary, on average. A solid financial plan will help you plug the gap so you can rest easy in retirement.
-
Are You Jeopardizing Your Future to Help Your Adult Kids? An Expert Guide for How to Not Do That
If your adult child needs financial help, of course you want to provide it, but crafting a plan that also protects your financial and emotional well-being is vital.