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Leftover money from home insurance claim

Leftover money from home insurance claim. Being a home owner necessarily means dealing with the unexpected. It can be a tree falling on your roof or a pipe bursting in your bathroom. You can’t possibly prevent all unwanted surprises. Therefore, knowing what to expect if you have a homeowner’s claim will help give you some peace of mind.

After a claim, you can keep the leftover money, as long as you didn’t lie and inflate the cost of repairs. The insurance company doesn’t always pay the homeowner directly after a claim.

You may receive several checks following one claim if there are multiple losses, and depending on the policy type, if you have a mortgage, your insurer’s payments for home damages may be made to you and your lender.

Who gets the payment in a home insurance payout?

Before you talk about Leftover money from home insurance claim, you should know who gets the payment. Many homeowners automatically presume that they’ll receive the payout following a home insurance claim. However, that is not always the case. According to Laura Adams, a financial expert,  “Claims for your personal belongings or additional living expenses (such as hotel and meal costs) if your home is uninhabitable during repairs, are separate funds made payable to you.”

However, in some cases, you may not be the recipient. If you have a mortgage, your insurer’s payments for home damages may be made payable to you and your lender.

Ultimately, this means that several people can receive the payout after a home insurance claim. Such people include:

The homeowner:

If you fully own your home, it is most likely you’ll get the insurance payout directly. In such case, you are solely responsible for paying for repairs or hiring a contractor to make repairs for you.

The mortgage lender:

If you have a mortgage, your insurer may give the money to your lender. You will have to work with your mortgage company to get the money. They may however request to oversee the repairs.

The property management company:

If you own a condo, the cheque may be sent to the condo association or property management company. You may have to request the funds and  work with the company to make approved repairs.

The contractor:

Some insurance companies pay directly to a contractor  after a claim, thereby bypassing the homeowner. This commonly happens if your insurer works with a network of professionals for home repairs. It also happens if you have assigned the claim to your general contractor to manage on your behalf.

How does the homeowners insurance claim process work?

Getting paid after a homeowners insurance claim is a multi-step process. Home insurers handle claims payment in different ways. It depends on the claim amount, your mortgage lender’s requirements and the extent of damage to your property. You should have your info ready.

Generally, when you report your claim, you will be required to provide your name, contact info, policy info, type and date of loss, and a description of the loss and of any injuries. If you have a home inventory, you may want to have it handy. Typically, your claim will be assigned a claim number and a claim professional aka an adjuster. The claim professional will work with you to adjust your claim. You should also take steps to mitigate further damage, such as buying tarps to cover holes in your roof. Make sure to save your receipts.

Below is a general overview of the homeowners insurance claims process:

Report your claim: You should contact your insurance company as soon as possible. If you are a Travelers customer, you can report a claim anytime online or by calling 1.800.Claim33. The faster you report it, the faster your insurer may be able to help.

Assess the damage: After you file the claim, the insurance company will send a claims adjuster to assess the damage in person. He will call you to discuss what happened, what your insurance policy may or may not cover and make arrangements to inspect the damage in person.  They will gauge the extent of the damage and figure out how much the repairs will cost.

Save your receipts: If you have to make any necessary temporal repairs or living arrangements to protect the property from further damage, be sure to save your receipts. Your insurer may ask you to provide them as part of the claim process.

Estimate the cost of repairs:

Once the evidence has been gathered, the adjuster and contractor will discuss the estimated payout. For a small claim, this process could take up a small period of time. Extensive claims will require a bigger payout. Thus, the process could take much longer. During this time, you could get your own assessment from your general contractor and compare the payouts to determine whether the estimate is accurate to the scope of required repairs.

Receive the payout: Once your insurer has settled the claim and a final estimate for repairs is agreed on, you’ll receive an initial payout. Depending on how you set the process up with your insurer, it will either arrive as a mailed cheque or as a direct deposit to the intended recipient. In the case of replacement cost value policies (RCV), a second amount — called depreciation — is released after a certificate of completion has been submitted to the insurer, verifying the required repairs have been completed

What if there are multiple payouts that need to be made?

In some cases, you might receive multiple checks stemming from one claim. This commonly happens when you need to use several different coverage. For example, if your home is destroyed by a hurricane, you could receive a cheque for the exterior damages, another cheque to replace lost personal items and a third one to pay for additional living expenses during the construction. 

There may also be another cheque written to a contracting company for home repairs. However, you may never see the money. Some contractors may request a “direction to pay” form that allows your insurer to pay directly to them. This arrangement simply implies that you legally assign your claim payment to the contractor. Thus, you’re completely removed from the process. This choice is a matter of preference. Ensure you fully understand your rights before giving control of a home insurance claim to a contractor.

Relocating After a Loss:

Loss of use: If you are unable to stay in your home after a covered loss, your homeowners policy could reimburse you for additional living expenses. Such additional expenses includes: hotels, car rentals and other day-to-day normal expenses caused by having to temporarily relocate.

Temporary housing: If you need temporal living arrangements while your home is being restored, your carrier may refer you to a service provider or give you permission to stay at a hotel or rental property.

Can you keep leftover money from a home insurance claim?

Technically, you are allowed to keep the leftover money after a home insurance claim. That is, if there is nothing written in your policy about returning unused claim money. As long as you didn’t lie to your insurer or commit insurance fraud, you should be able to keep the balance.

Typically, the claim amount is based on a projected cost for repairs. However, market prices and fluctuations could affect the projected estimate. Thus, repairs may be cheaper than initially estimated. Ordinarily, any excess of estimated repairs is put towards upgraded materials and minor cosmetic choices that are within the scope of required repairs.

However, lying to your insurer about how much the repairs cost in order to keep the leftover funds is fraud. As well as being illegal, the consequences with your insurer are quite significant. If you don’t make the required repairs and complete them to the insurer’s satisfaction, future claims may be denied. Also, the insurance company retains the right to terminate your policy.

What do you do if you do not like the offer made by the insurance company?

Sometimes, the insurance company’s payout might be less than what you expected it to be. Before you accept the money, you can negotiate with your insurer to get a higher, more accurate payout.

If you got your private contractor assess the damage and estimate the repair costs, it can provide comparative context for the carrier to adjust their estimate accordingly. Avoid puffing your claim making it seem more expensive than it really is. This is because the total claim payout can affect how much your rates increase later.

What do you do in case of an underpayment? 

It is advisable to only contest a claim if it is significantly less than what one or more contractors quote for the necessary repairs. You should also contest if something critical is left unaccounted for — for instance, solar panels on a roof claim. Negotiating for a higher claim payout may not always be in your best interest. This is because it can lengthen the time for the claim to be settled and repairs to actually take place. Also, if you have an actual cash value policy, and you try to get a payout for your home’s replacement cost, you’ll probably lose that battle.

If you’re dealing with a minor claim, you should just take the money and make the repairs. Most times, contesting a claim won’t even need to be a concern unless you are involved in a large-loss claim.

Conclusion:

Insurance claim payouts can be really complicated. As the homeowner, there’s no guarantee that you’ll receive the cheque for repairs yourself. It depends on your mortgage lender and the insurance company’s policies around hiring contractors. Whatever be the case, you can technically keep leftover money after a claim payout. You just have to ensure you’re not committing insurance fraud or lying to your insurance company about the cost of repairs. Doing that is illegal and fraudulent. It’ll have terrible side effects for you.