Here we are, already at the end of February 2022. Time is flying by!
Recently, we had a client who was asking us about a public adjuster. How do they work? How do they get paid? And if they should use one.
Let's start with: What is a public adjuster?
According to Wikipedia: "A public adjuster is a professional claims handler/claims adjuster who advocates for the insured/policyholder in assisting and negotiating that insured's insurance claim."
How they work is, they are your liaison during the claims process and should handle the claim for you on your behalf. A public adjuster’s selling point is typically, "we will get you more money for your claim than if you handled it on your own". Now this can be a good thing, right? Maybe...
Insurance companies are supposed to handle claims the same way, whether there is a third party involved or not. Insurance companies should pay the same for a loss, whether there is a third-party public adjuster or not. If a house burns down and there is $500K in coverage, the insurance company should pay $500k. I am not sure how the insurance company could pay more when there isn't more coverage to be able to pay more.
How do public adjusters get paid?
Public adjusters charge a percentage of what a claim will pay out (negotiated up front and is typically 10% or more). In the example above, if the public adjuster handled the claim for a total loss on a house and the payout was $500k, the public adjusters fee would be $50k.
My only concern for the client would be, what do you do about losing $50,000 from your coverage to help you rebuild your home? Where does that money come from? Unfortunately, it would be out of the client’s own pocket.
Is there a time when a public adjuster may be helpful?
Yes. If you have already filed a claim and you feel that there is still more damage that needs repaired, a public adjuster may be able to help, especially if you feel like you are going nowhere with the insurance company. At that point, the public adjuster's percentage would be the same, but the payout would be lower, therefore not creating a burden of such a large gap to help you rebuild.
The design and idea of a public adjuster is great. In my opinion, the execution is not good though. If a public adjuster charged a flat fee instead of a percentage, I think it would be a better winning approach. Alternatively, if you have an insurance agent, they could assist with claims when needed. We (agents) know how frustrating it can be to navigate the insurance world and are always happy to help. If you ever find yourself in an insurance situation you are unsure how to navigate, please let me know how we can assist you.
