A contractor’s guide to repair estimates and underinsurance for Chicago South Suburban property owners
By ATC Property Services Inc.
Having property insurance does not always mean the entire repair bill will be paid. Your deductible, coverage limits, depreciation, exclusions, and policy conditions can affect what you receive. Before committing to repairs, compare the contractor’s written scope with the insurer’s estimate and ask your insurance professional to explain any funding gap.
At ATC Property Services, our repair work has highlighted an important concern: owners can discover differences between the work their property needs and the money available to complete it. This guide explains what to document and what to discuss with your insurance professional.
What does underinsured mean?
Being underinsured means your insurance protection is insufficient for the loss you face. A building limit that falls below today’s rebuilding cost is one example. A separate coverage limit may also be too low for a particular expense.
A repair bill exceeding an insurance check does not, by itself, prove underinsurance. The difference may involve a deductible, depreciation withheld until eligible repairs are completed, an omitted repair item, or work the policy does not cover.
Your property’s sale price, mortgage balance, and rebuilding cost are different figures. Ask your licensed insurance agent or broker to review the rebuilding estimate and coverage limits rather than relying on the purchase price alone. [Source A]
Why the repair estimate and insurance payment may differ
The scopes may differ. Compare the rooms, quantities, materials, preparation, removal, and finishing work in each estimate. A lower total may reflect less work rather than a lower price for the same work.
Deductibles and depreciation affect payment. Replacement cost and actual cash value are different settlement methods. Actual cash value generally deducts for age and wear. Some replacement cost claims involve an initial depreciated payment and later payment after conditions are met. Ask what is recoverable and by what deadline. [Source B] [Source C]
The policy may exclude part of the work. Ask the insurer to separate covered damage from maintenance, deterioration, or other excluded conditions and identify the policy provisions supporting its decision.
Code requirements may add cost. Ask your insurance professional about ordinance or law coverage, its limits, and its conditions. Do not assume every required upgrade is included. [Source A]
What should you do after property damage?
Protect people first. Keep away from unsafe structures and water near electrical equipment. Use appropriate emergency services when needed.
Notify your insurer promptly. Ask about inspection arrangements, documentation, claim deadlines, and your duties after a loss.
Document what you can safely see. Photograph whole rooms and close-ups. Record when you discovered the damage and keep a dated communication log.
Limit further damage safely. Arrange appropriate temporary protection and keep invoices and receipts. Coordinate permanent repairs with the insurer’s inspection and documentation requirements; do not delay necessary safety measures.
Get an itemized repair scope. Ask what the estimate includes, excludes, and assumes, along with how hidden damage will be handled.
These steps help preserve the record; they do not guarantee that an expense is covered. [Source D]
Quick examples of underinsurance and repair funding gaps
These illustrative scenarios draw on the kinds of repair situations ATC encounters. Details are generalized to protect privacy. All dollar amounts and coverage assumptions below are hypothetical; they do not describe a verified customer settlement or insurer decision.
Burst pipe damage exceeds the available limit. A pipe breaks, and water damages flooring, walls, and cabinets across several rooms. Suppose covered repairs total $60,000.00, but the applicable coverage limit is $40,000.00. With no other applicable coverage, that leaves a $20,000.00 limit shortfall before considering deductibles or other policy adjustments. Ask: What limits or water-damage restrictions apply, and are they sufficient for a loss affecting multiple rooms or units?
An older building needs code upgrades. During an insured repair, the local authority requires electrical or other code upgrades. Suppose eligible additional code work costs $15,000.00, but the applicable ordinance or law coverage is limited to $5,000.00. Assuming no other coverage applies, the owner faces a $10,000.00 gap for that work. Ask: What ordinance or law protection do I have, and is its limit adequate for my building? [Source A]
Lost rental income outlasts the coverage. A damaged rental unit cannot be occupied while repairs are completed. Even if the physical repairs are covered, the owner can still face a shortfall if applicable rental-income coverage reaches its dollar or time limit before the covered restoration period ends. Ask: How are lost rents calculated, and what limits, time periods, and conditions apply? Have your insurance professional review the rental policy specifically.
A building limit has fallen behind rebuilding costs. An owner has maintained the same limit while construction costs and property improvements have increased. After a major covered loss, the available building limit may be insufficient to rebuild, depending on any extended or guaranteed replacement cost protection. Ask: When was my rebuilding estimate last updated, and does my coverage reflect the property as it exists today? [Source A]
Storm damage with existing rot is a different issue
Storm-damaged soffit and fascia may reveal older deteriorated wood behind the covering. If the insurer determines that some work involves excluded deterioration, the owner may have to fund that portion. That is a coverage issue and does not, by itself, establish that the property was underinsured.
The contractor should document visible and concealed conditions and price additional work separately. If matching materials are unavailable, discuss alternatives, appearance, cost, and the insurer’s position before ordering. A contractor cannot promise that full replacement or an exact match will be covered.
The practical lesson: Ask your insurance professional to review both the amount of coverage and what it covers before damage occurs. A larger building limit alone may not resolve an exclusion, a separate sublimit, or missing coverage.
Questions to ask your insurance professional before a claim
Does my building limit reflect today’s rebuilding cost and recent improvements?
Is the building, including the roof, covered on a replacement cost or actual cash value basis?
What deductibles, sublimits, and insurance-to-value or coinsurance conditions apply?
What protection do I have for required code upgrades, water backup, and flood damage? These can involve separate coverage or exclusions. [Source A]
How would a vacancy, renovation, rental use, or multiple dwelling units affect my policy?
If the property cannot be occupied, what coverage applies to temporary housing or lost rental income, and for how long?
Rental and multiunit owners should ask for a review suited to the building’s actual use. A homeowner’s policy should not simply be assumed appropriate for a rental or mixed-use property.
What if the insurance payment is less than the estimate?
Ask for a written explanation of the difference. Determine whether it concerns scope, pricing, depreciation, the deductible, or coverage limits. Give the insurer documented repair information and request review of any missing work. If hidden damage is found, document it before covering it and ask about the process for submitting additional information.
Before authorizing work, confirm the repair price, expected payment timing, and your potential out-of-pocket obligation. Do not assume a later payment will cover the gap. A contractor can explain repair facts and pricing; coverage advice and claim representation require the appropriate professionals. A licensed public adjuster may assist an owner with a claim, and an attorney may advise on legal disputes. [Source E]
Need help understanding the repair work?
Contact ATC Property Services at 888-202-1949 to discuss your property’s location, damage, and repair-estimate needs. Scope and service availability are confirmed before scheduling. You can also contact ATC online.
ATC provides contracting information. We do not sell insurance, determine coverage, or act as your public adjuster. Consult your licensed insurance professional about policy adequacy and claim questions. This article provides general information; your policy and circumstances control.
Helpful insurance resources
Source A: NAIC Consumer’s Guide to Home Insurance — rebuilding cost and optional coverages.
Source B: Illinois Department of Insurance Shopping Tips — replacement cost and actual cash value.
Source C: Insurance Information Institute Claims Payment Guide — payment stages and repair documentation.
Source D: Illinois Department of Insurance Disaster Resources — post-loss guidance and consumer assistance.
Source E: Illinois Department of Insurance Public Adjuster Guide — roles and consumer considerations.