Insurance Claim Scope of Loss Explained

WHAT IS AN INSURANCE CLAIM SCOPE OF LOSS?

A scope of loss is a detailed description of the amount and type of damage that has been done to a structure; it includes the quantity and quality of materials and the current cost of those materials and labor that will be needed to repair that structure. A scope of loss is typically more detailed than an estimate. A clear and complete insurance claim scope of loss helps a property owner get a fair, full and prompt insurance claim settlement and resist “lowballing”. A scope of loss often includes photos, diagrams, and a detailed line item broken down by construction trades and materials. A complete scope of loss will specify the work that needs to be done to comply with the local building codes in the area.

DESCRIBING PRE-LOSS PROPERTY

Most insurance companies value a loss and make a settlement offer by preparing an estimate or a scope of loss. The insurance company’s adjuster will usually inspect the property and interview the insured. Insurance companies generally base their claim settlement offers on estimates or scopes of loss.

You – the insured – can prepare or hire a claim or construction professional to prepare your own scope, and then see how it measures up against the insurance company’s scope.

Some insurance adjusters prepare their own scopes, others hire outside contractors to prepare them. Many adjusters today use a computer program called Xactimate to prepare their scopes, estimates and settlement offers. Xactimate is a tool, and should not be the last word. Computers don’t rebuild homes – contractors do. If an adjuster using Xactimate software doesn’t input complete or accurate information about your property and/or current costs, the estimate it produces will be inaccurate.

WHY IS SCOPE OF LOSS SO IMPORTANT?

Typically, the insurance company will make a settlement offer for repairing your home. The insurance company may base this offer on a “scope of loss,” “estimate,” “loss evaluation” or some other label. The label doesn’t matter. What matters is that it is complete and accurate. The more detail you provide about your pre-loss home, the more accurate that offer should be. But lowballing on claims is fairly common, so you need to be pro-active to nail down the true costs of returning your home to its pre-loss condition.

WHAT IS LOWBALLING?

“Lowballing” occurs when the insurance company’s offer of what they will pay to repair your home is LESS THAN  what it will actually cost you. Unless you have the construction expertise needed to evaluate whether the scope of work/materials and the cost assigned to those items in the insurance company’s offer is accurate.  The best way to know if you’re being “lowballed” by an insurance company is by having a scope of loss prepared by an independent third party.  This is known as an Independent Scope of Loss. 

WHO CAN PREPARE AN INDEPENDENT SCOPE OF LOSS?

An experienced contractor familiar will the insurance claims process, like CIG Construction, can assist in preparing a scope of loss. Other independent consultants, construction estimator or public adjuster are able to prepare a scope of loss, usually for a fee. The independent scope is very often the key to getting a fair insurance settlement and moving forward..

An advantage of using an independent scope of loss to negotiate with the insurance company is that it usually contains a greater level of detail about the scope of work to be performed and its associated costs. When the insurance company is provided with a credible detailed scope of loss, it becomes harder for them to underpay the claim. Additionally, an independent scope of loss is more likely to be formatted similarly to the insurance company’s scope of loss, allowing for “apples to apples” comparison of the work and costs estimated by the insurer and the insured. An advantage of using a contractor’s bid/estimate to negotiate with the insurance company is that some contractors will provide a scope of loss, as a means of showing good will, and hopefully, getting your business for the repair process.