A property insurance claim audit underpayment happens when an insurer pays less than the actual cost to repair or rebuild, often due to low estimates, overlooked damages, or policy technicalities, requiring policyholders to dispute by gathering strong documentation (photos, contractor bids), filing supplemental claims, or hiring experts like public adjusters or attorneys to fight for full, fair compensation.
Why Underpayments Happen:
- Low Estimates: Insurers use their own low-cost estimates, not the real cost of repairs.
- Overlooked Damage: Adjusters miss damages during inspections, or don't account for code upgrades.
- Technicalities: Using Actual Cash Value (ACV) instead of Replacement Cost Value (RCV) or misinterpreting policy language.
- Intentional Savings: Companies may intentionally underpay to save money.
Steps to Address Underpayment:
- Document Everything: Take detailed photos/videos, get multiple contractor estimates, and keep all receipts.
- Review Your Policy: Understand your coverage, especially replacement cost vs. actual cash value.
- File a Formal Dispute: Write a clear letter to your insurer, including policy/claim numbers, reasons for dispute, and supporting documents.
- File a Supplemental Claim: Submit revised estimates and documentation for missed items or pricing errors.
- Hire a Public Adjuster: A professional adjuster can fight the insurer on equal footing.
- Request Appraisal: If disputes continue, this appraisal process can resolve valuation without a lawsuit.
- Consult an Attorney: An attorney can help with complex cases, bad faith claims, or lawsuits.
Key Actions & Rights
- You are entitled to full coverage for covered losses.
- You can reopen a claim within a limited time period.
- Insurers can be sued for negligence or bad faith in underpaying claims.
Important To Keep In Mind
Insurance companies process claims every day. They have superior knowledge over a homeowner that may only file 1 claim in their lifetime. If you don't have a public adjuster or attorney on your claim, it is more likely than not that you will be paid less. Insurance companies take notice of public adjusters and attorneys and realize they can't just lowball your claim if they are representing you. For this reason we do not recommend that you try to negotiate your own claim.
