DEFINITION of Independent Insurance Adjuster

An independent adjuster is called independent because they might not be employed directly by the company, firm, or agency in question but instead by a third-party who specializes in homeowners or other types of insurance claims. They adjust claims on behalf of the insurer, but not directly as an employee of the insurer. When they are contracted as a third party, the insurer is essentially outsourcing the claim and the adjustment process to a claims-handling company, who then turns it over to one of their adjusters.

BREAKING DOWN Independent Insurance Adjuster

Homeowners insurance will cover you against an array of damages sustained, such as damages as a result of a storm or a break-in. Should you have to file a claim for the insurance policy, an adjuster will come to assess the damage and legitimacy of the claim back to the insurance company. Two types of adjusters will typically perform an inspection— either a public or independent adjuster. An independent adjuster sounds like the type that would most benefit the homeowner, but the distinction between the two adjusters is often misunderstood.

Independent adjusters are required to comply with the license requirements of the state in which they perform their work, and can work as 1099 independent contractors or W-2 employees. They are typically hired for one of two main reasons—a high volume of claims and/or statutory reasons. During times of natural disasters, the number of homeowner’s claims increases substantially. For example, in 2012 Hurricane Sandy destroyed considerable portions of the New Jersey coastline and New York, destroying around 200,000 homes. As a result, homeowners insurance companies saw a spike in claims.

Insurance companies often do not have the human resources to delegate this type of responsibility, and as such will hire independent adjusters to ease their workload. An insurance company can commission a third-party insurance company to negotiate and assess on its behalf. The nature of this type of work also highlights the use for independent adjusters in remote or highly specialized areas. Examples of this could be a country home in the mountains or damage done by a rare animal not often seen in most insurance claims.

In many cases, the rules of a particular state or provision of a specific insurance contract will also actually mandate the use of an independent adjuster. This is something to consider when buying homeowners insurance and comparing different insurance companies. Independent insurance adjusters are not your only option, though. Should you want your own adjuster handling the process for you, there are public adjusters. Public adjusters work solely on behalf of the homeowner and do not represent either insurance company in the negotiations.

What is a Public Adjuster?

Public adjusters will make their own assessments of damages to the home, the report of which you can then submit to your insurance company. While in theory, the public adjuster has the best intentions of the policy owner in mind, always be mindful if hiring one. A homeowner’s inexperience and an adjuster’s specialty creates the opportunity for manipulation. The same follows for independent adjusters and the overall insurance company as well. A benefit to homeowners using public adjusters though is that, similar to insurance attorneys, they are paid a commission off of the recovery. In other words, they only get paid if you do, which encourages them to work in your best interest. Public adjusters are also hired to assess the work done by the independent adjuster to assure corners have not been cut and that the homeowner is receiving as much as they can.

The Bottom Line

Understanding the definition of an independent adjuster is crucial to your claims process. An independent adjuster does not represent the homeowner in any capacity, but rather an insurance company. If you prefer to have your own representation, getting a public adjuster might be a good idea.