Claims Handling, Policy Coverage, and Loss Estimation Fundamentals
Coverage analysis
The policy is the source of the adjuster's authority. Read the insuring agreement, exclusions, conditions, limits, and deductible before estimating. Identify the cause of loss and whether it is covered; then test exclusions such as wear and tear, faulty workmanship, or repeated seepage. Conditions may require prompt notice, mitigation, a proof of loss, and inspection. The insured bears the burden of proving a covered loss.
Loss estimation
Estimation is a scope-and-pricing exercise. Document pre-loss condition, measure damaged quantities, separate covered from noncovered work, and price labor, materials, overhead and profit, sales tax, and code upgrades where applicable. Distinguish replacement cost value (RCV) from actual cash value (ACV): ACV is RCV less depreciation. Deductibles apply before payment, and policy limits cap recovery. Recoverable depreciation is typically released after repairs are completed and documented.
Worked example
A 20-year-old roof has RCV of $20,000, depreciation of $8,000, and a $2,000 deductible. ACV is $12,000; the first payment is $10,000 ($12,000 minus the deductible). If the insured repairs and submits documentation, the $8,000 recoverable depreciation may be paid, subject to the policy limit and any nonrecoverable items. Paying full RCV upfront is wrong.
Traps
Do not confuse ACV with RCV or ignore the deductible. Do not include noncovered code upgrades without checking ordinance-or-law coverage. Do not overlook matching or undamaged-material issues. Do not estimate from the insured's description alone; inspect and photograph. Do not treat a contractor's bid as the final scope.