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The Ins and Outs of Reconstruction: Part 1

The Ins and Outs of Reconstruction: Part 1

The aftermath of a water loss can be devastating. The entire process can be downright frustrating and hard to understand. Once you have had professionals extract the water and your home cleaned up, what’s next?

After your home is properly mitigated for water damage, you will need additional work to return your home to its pre-loss condition. This is where reconstruction comes in. The reconstruction process can be confusing and things are handled differently than the mitigation portion of your job. For example things move much slower at this stage of things. Below we will outline what needs to happen for your home to be fully restored. In the first blog, we will address payment and the insurance process for reconstruction as this portion in itself can slow down getting you back to normal unless handled with care on your part.


Payment for Mitigation and Reconstruction are usually separate:

  • Payment for the first steps in helping you with your loss to the mitigation and emergency services company who helped you will likely be issued separately from the payment from the reconstruction.
  • If this mitigation payment is sent to you rather than to your restoration company, then you will be responsible to pay that bill. Many insurance companies will allow you to instruct them to pay restoration companies directly if you tell them to do so. Instructing the insurance carrier to do so directly allows you to stay out of the middle of the billing process and streamlines the payment process for all.
  • If you receive a billing statement from your restoration company, then this means they have not yet been paid for their services. Please check with your adjuster on how they process payments.
  • Any “mystery check” that shows up in your mailbox could very well be a payment for your restoration company’s services. Please check with your adjuster as to what the payment is for before you cash any check.
  • Your Reconstruction vendor may not be willing to start this portion of the job until they get a draw on what is owed so if you do receive any money you should let them know that right away. Especially if the insurance company has added the name of your mortgage company to the list of payees on the check.
  • Reconstruction is often paid in two halves, ACV and RCV. (For an explanation of these phrases and the payment of this portion of the claim please see below.) It is very rare that an insurance company pays the full amount due prior to the work being completed.

Next, let’s discuss the reconstruction that is needed to put your home back together. It takes a lot of time and effort for any construction company to write an estimate and negotiate what is fair and reasonable cost for restoring your property to pre-loss condition. It is not unreasonable to sign agreements and commitments to perform the work prior to the estimate being agreed to since the company you hire is committing a lot of resources to your project even before the insurance adjuster comes to agreement on the scope of work and the cost of your job. We want to give you some insight into the typical process from this point forward.

The Insurance Process for Reconstruction:
Each insurance carrier has their own process for the reconstruction needed in your home. What follows here is some generic information about the process and might not apply in your case. Always check with your adjuster on your company’s processes and follow their instructions rather than what is listed here in this article.

Usually, the next steps are for you to identify a company to do the reconstruction. Your insurance company and your adjuster might be able to help you with that decision. Some insurers want you to only use a company that is on their vendor list because they have already vetted that company as meeting standards that should be in place such as licensing and insurance for that company which protects both you and your insurer.
It may then take several days or several of weeks for the insurance adjuster and the construction company you choose to agree upon the scope of work and the price of that work. Any negotiations that are taking place as to the coverage and the cost of this work is done between these two parties.
The adjuster and the construction company must ultimately agree upon an estimated price for the work and a scope of work. This agreed upon price includes the portion you will pay, which is what your deductible represents.

Before the work begins you should expect that the construction company will want to collect your deductible if applicable. They will also develop a draw schedule for payments on the work, which will fund the job as it is in progress. You will want to review this whole process with your adjuster so that you understand your specific insurance company’s process and procedure for this.

You may be asking yourself why did YOU get left out of this process? Don’t you get to see what the insurance company will pay and then try to negotiate a better price on what you pay for the work? In a word no. Since the insurance company is footing the bill they have the legal right to negotiate the cost of the work. You do not get to renegotiate afterwards and should you do so and pocket any money “leftover” you could be considered guilty of insurance fraud.

ACV vs. RCV – What the heck does that mean?
Your insurance company may initially pay only the ACV on your reconstruction. What does that mean? It is the “Actual Cash Value” of the work and it is meant to encourage you to complete all needed repairs so the work is finished the insurance company can release the additional money called for in the agreed upon estimate. This is sometime called the depreciation or the “RCV” (Replacement Cost Value).
This RCV money is part of what your construction company will expect as payment for their work. It may be that your insurance carrier requires you to sign more paperwork, near the end of your reconstruction work, to release these final RCV funds.

In our blog next week, we will continue the explanation of the reconstruction process. We will look at what ACV and RCV mean to you and how to deal with all the paperwork that is involved during reconstruction. The most important thing after a water loss is for your home to be restored to its original state. ServiceMaster Restoration strives for excellence in all our work. Our goal is to restore your property as quickly and efficiently as possible. We provide quality reconstruction services with expert care.