Can you retain the money from your home insurance claim?
When you make a home insurance claim, your insurer reimburses you for the estimated cost of repairs. You may be asking if you may keep any money that remains once the repairs are completed. A few things influence the answer. Continue reading to learn who normally receives a reimbursement following a house insurance claim, how the claim process works, and what happens to any remaining insurance money
Who Receives The Money From A House Insurance Payout?
Many homeowners believe they will automatically get reimbursement after filing a house insurance claim. That is not always the case, though. "Claims for your personal possessions or additional living expenses (such as hotel and food charges) if your property is uninhabitable during renovations are distinct money made payable to you," says financial expert Laura Adams.
However, in rare cases, you may not be the receiver. "However, if you have a mortgage, your insurance company's reimbursements for house damage may be made due to both you and your lender." "You may need to endorse the payment and escrow it until the work is done and approved for payment," Adams says.
Ultimately, this means that the settlement from a house insurance claim may be split among numerous persons. Following a loss, the following individuals may be eligible to receive insurance proceeds:
- The homeowner: If you own your property outright, you will most likely get the insurance reimbursement immediately. You are responsible for paying for repairs or finding a professional to do them.
- The mortgage lender: If you have a mortgage, your insurance company may pay your lender. You will need to negotiate with your mortgage company to obtain the funds, and they may want that you supervise the repairs.
- The property management business: If you own a condo, the cheque may be forwarded to the condo association or property management firm. You will need to seek the cash and maybe collaborate with the firm to complete the agreed repairs.
- The contractor: Some insurance companies pay a contractor straight after a claim, bypassing the homeowner entirely. This is frequent if your insurance company works with a network of specialists for home repairs, or if you have delegated claim management to your general contractor.
What Is The Procedure For Filing A Homeowners Insurance Claim?
Receiving payment following a homes insurance claim is a multi-step procedure. Depending on the degree of the damage, determining a repair quote might take weeks or even months. Keep in mind that each carrier has its own set of protocols.
"Home insurers manage claims payment in a variety of methods, based on the size of the claim, the requirements of your mortgage lender, and the level of property damage." "When you file a claim, an adjuster normally inspects your house and estimates your compensation depending on the terms and restrictions of your home's insurance policy," Adams adds.
The following is an outline of the homeowner’s insurance claims process:
Following the filing of the claim, the insurance company will dispatch a claims adjuster to assess the damage in person. They will assess the extent of the damage and estimate the cost of repairs based on market labor and material rates, as well as any overhead or profit for the contractors (as applicable). The adjuster may come to your home to get a second opinion and determine the insurer's final estimate.
After gathering the evidence, the adjuster and contractor will discuss the estimated payout. This process could take several weeks for a minor claim. The process may take much longer for more extensive claims that require a larger payout. You can also get your own assessment from your general contractor during this time and compare the payouts to see if the estimate is accurate for the scope of required repairs.
You will receive an initial payout once your insurance company has settled the claim and a final repair estimate has been agreed upon. It will arrive in the form of a mailed check or as a direct deposit to the intended recipient, depending on how you set up this process with the insurance company. In the case of replacement cost value policies (RCV), a second amount, known as depreciation, is released after the insurer receives a certificate of completion verifying the required repairs have been completed.
What If There Are Several Payouts To Be Made?
In some cases, you may receive multiple checks as a result of a single claim. This is especially common when multiple coverages are required. For example, if your home is damaged by a hurricane, you may receive one check for exterior damages, another check to replace lost personal items, and a third check to cover additional living expenses while the house is being rebuilt.
Another check could be written to a contracting company for home repairs. But you're unlikely to see that money. "Some contractors may request a "direction to pay" form that allows your home insurer to pay them directly," Adams says. As a result of this arrangement, you legally assign your claim payment to the contractor and are removed from the process. Before handing over control of a home insurance claim to a contractor, make sure you fully understand your rights."
This type of payment instruction is also known as an assignment of claim or assignment of loss. Many homeowners prefer to have their trusted general contractor handle the entire claim and repairs from start to finish for large loss claims, but this is a personal preference.
Can You Keep Any Money Left Over From A Home Insurance Claim?
Technically, you are permitted to keep any money remaining after a home insurance claim. That is, assuming your policy makes no mention of returning unused claim money. You should be able to keep any remaining balance as long as you did not commit insurance fraud or lie to your insurance company to obtain the money.
The claim amount is generally based on a projected cost for repairs, but market prices and fluctuations in wholesale rates mean that repairs are sometimes less expensive than initially estimated. Any excess of estimated repairs is typically used to upgrade materials and make minor cosmetic changes that are within the scope of required repairs.
However, lying to your insurance company about the cost of repairs in order to keep the leftover funds is considered fraud. Aside from being illegal, the consequences with your insurer are severe. If you do not make the required repairs and complete them to the satisfaction of the insurer, any future claims may be denied. Furthermore, the insurance company has the authority to cancel your policy.
What Should You Do If You Do Not Agree With The Insurance Company's Offer?
In some cases, the insurance company's payout may be less than you anticipated. You have the right, before accepting the money, to negotiate with your insurance company for a higher, more accurate payout.
If you had your own contractor assess the damage and estimate the repair costs, the carrier may be able to adjust their estimate accordingly. Adjustments to your estimate are typically requested to ensure that all repairs within the scope of what is owed are accounted for, as well as that manufacturer requirement are not overlooked. Avoid "padding" your claim by making it appear larger than it is, as the total claim payout can influence how much your rates rise later.
A Claim Was Underpaid.
Only fight a claim if it is much less than what one or more contractors price for the required repairs, or if something crucial is missing, such as solar panels on a roof claim.
Negotiating a larger claim compensation is not always in your best interests. It may increase the time it takes for the claim to be settled and repairs to be completed. And if you have real cash value insurance and try to collect reimbursement for your home's replacement cost, you're unlikely to win.
If you have a modest claim, it is advisable to accept the money and perform the repairs. Unless you are involved in a large-loss claim region and adjusters spend very little time on inspections, challenging a claim should not be a worry in most situations. This might occur when a whole state is impacted by a terrible catastrophe and carriers are short on adjusters to conduct thorough inspections.
The bottom line:
- If you file a claim, you can retain any remaining funds as long as you don't mislead about the cost of repairs.
- After a claim, the insurance company does not always reimburse the homeowner directly.
- If there are several losses and depending on the policy type, you may get multiple checks following a single claim.
Insurance payouts might be difficult to understand. There is no assurance that you will get the cheque for repairs as the homeowner. It is subject to the policies of your mortgage lender and insurance provider on employing contractors. In any case, you can potentially keep any money left over after a claim settlement. Just make sure you're not committing insurance fraud or lying to your insurance company about the cost of repairs, both of which are against the law.