Insurance claim advance payments are not well known to claim filers. Often when an insured has a loss of significant size, such as a flood, tornado, wildfire, hurricane loss, or large water damage loss, the insurance company issues an advance payment of a part of the advance agreement. This situation also occurs regularly when a company has a loss and needs money up front.
It is standard and widely accepted practice for the insurance company to issue an advance in these types of cases. Note that there is nothing in the standard property insurance policy that deals with down payments. Usually, it is just a courtesy that the insurance company extends to its insured.
However, they usually do not offer to do so. You have to ask for the advance.
Here is an example. Joe Smith’s house is struck by lightning and a fire damages most of the house. Joe’s policy has $100,000 construction limits, $50,000 contents limits, $20,000 ALE limits. The house can be repaired for $70,000, which is less than the policy limits. However, the adjuster expects the loss of contents to exceed the policy limits of $50,000 and the ALE loss to be $15,000. The adjuster sends the first report from him to the insurance company and tells them to expect the loss to be approximately $135,000 on these three parts of coverage.
The insurance company could easily issue an initial advance payment of $25,000 to $35,000 for contents and ALE, and $40,000 to $50,000 for home loss.
So what do you do if your Contents are damaged and you need the most basic things, like a change of clothes and shoes? What if you need a contractor to secure the building and tarp the roof to prevent more rain from entering the building? Most people don’t have tens of thousands of dollars in their bank accounts that could be used to start repairs or start replacing personal property. That’s when the insurance company issues an advance.
It is best to make your request in writing. Even if it’s just a handwritten letter, it’s better if it’s in writing. Write or type your request, keep a copy for your records, and give the copy to your adjuster. It’s also a good idea to send a duplicate copy to your insurance company’s claims department. Send it by express courier or certified mail. NEVER trust the adjuster to request a down payment on your behalf. You could be delayed with other work and it could be days before you ask. DO IT YOURSELF.
Take control of your claim, my friend! Make a request EARLY in the claims process for your advance payment!