Title: Keeping Your Homeowners Insurance Claim Check: What You Need to Know
If you've suffered property damage and filed a homeowners insurance claim, you may be wondering: Can I keep the insurance claim check and make the repairs myself? The answer is - it depends.
As a homeowner, you have the right to choose how your claim payout is used. However, there are some important factors to consider before deciding to pocket the money and take on the repairs yourself. In this post, we'll break down what you need to know.
Understanding Your Claim Payout
First, it's important to understand how homeowners insurance claim payouts typically work. After you file a claim, your insurer will send an adjuster to assess the damage. They will then calculate the cost of repairs and issue a payout based on your policy terms.
If you have a mortgage on your home, the check will usually be made out to both you and your mortgage lender. This is because your lender has a financial interest in ensuring that the necessary repairs are made to protect their collateral.
In this case, you'll need to endorse the check and send it to your mortgage company. They will then place the funds in an escrow account and release them in installments as the repair work is completed.
If you own your home outright with no mortgage, the insurance claim check will typically be made out to you alone. This gives you more flexibility in deciding how to use the funds.
Factors to Consider
So, can you simply keep the money and do the work yourself? Here are some of the key factors to weigh:
1. Scope of Damage
The extent of the damage is a significant consideration. If it's a relatively small, straightforward repair, it may be feasible to do it yourself or hire your own contractor. However, if the damage is extensive or complex, it's usually best to work with a professional restoration company that has experience navigating the insurance claim process.
2. Mortgage Lender Requirements
As mentioned, if you have a mortgage, your lender will have a say in how the claim funds are disbursed. Most lenders will require the repairs to be completed to their satisfaction before fully releasing the funds. They want to ensure the work is done correctly to maintain the value of their collateral.
3. Contractor Estimates vs. Insurance Payout
It's important to get detailed estimates from reputable contractors for the full scope of work needed. Compare these estimates to your insurance payout. If the payout is significantly lower, you may need to negotiate with your insurer or cover the difference out of pocket. On the flip side, if the payout exceeds the estimates, you may be able to keep the difference.
4. Building Codes and Permits
Depending on the nature of the repairs, building permits may be required to ensure the work is up to code. DIY repairs that fail to meet building standards could cause issues down the line when you try to sell your home. Professional contractors will secure necessary permits and ensure work is compliant.
5. Potential for Future Issues
Improper repairs, even if not immediately apparent, can lead to long-term problems like structural issues, mold, or electrical hazards. If you make repairs yourself and issues arise later, your insurer could deny future claims on the basis that the initial work was not done correctly.
6. Time and Effort
Doing repairs yourself can be time-consuming, especially if you have to take time off work. It can also be stressful, particularly if you're dealing with a large loss and displaced from your home. Weigh the demands on your time and energy when deciding whether to do the work yourself.
7. Tax Implications
In general, homeowners insurance claim payouts are not considered taxable income. However, if you do the repairs yourself and pocket money left over, that extra cash could potentially be considered taxable. Consult a tax professional for guidance.
Making the Decision
Ultimately, whether to keep your claim check and do your own repairs is a personal decision that depends on your unique situation. If the damage is minor and you're confident in your ability to do the work up to code, it may make sense. You could potentially save some money and have more control over the repairs.
However, for most homeowners, especially those with more extensive damage, working with a professional restoration company and allowing the insurance process to unfold is often the wisest choice. It ensures repairs are done to a high standard, reduces your personal liability, and allows you to focus on recovering from the stress of the loss.
If you do decide to handle the repairs yourself, be sure to keep detailed records and receipts for all expenses. Take before and after photos of the damage and repairs. Communicate with your insurance company about your plans. If you have a mortgage, you'll need to work closely with your lender to navigate their requirements and get the funds released.
Also, be aware that your insurer will only release a payout once per loss event. If you discover additional damage after repairs have begun, you may have difficulty getting additional funds released. Working with a professional who can thoroughly assess the damage upfront can help mitigate this risk.
When to Consider Hiring an Attorney
If you're having trouble getting a full and fair payout from your insurer or have concerns about the claims process, it may be worth consulting with an experienced insurance claims attorney. An attorney can review your policy, help you understand your rights, and advocate on your behalf with the insurance company.
Some signs that it may be time to hire an attorney include:
- Your claim has been unfairly denied or undervalued
- Your insurer is unresponsive or delaying payment
- You have a large, complex claim and feel overwhelmed navigating the process
- The damage has forced you out of your home and you need help with additional living expenses
- You suspect bad faith practices by your insurer
An attorney can help level the playing field against a large insurance company and fight to ensure you receive the full payout you're entitled to under your policy.
Preventive Measures for Future Claims
Dealing with a homeowners insurance claim can be stressful and time-consuming. While you can't prevent all damage, there are steps you can take now to make the claims process smoother if you do suffer a future loss:
1. Review your policy regularly to ensure you have adequate coverage. Consider add-ons like flood or earthquake insurance if you live in a high-risk area.
2. Keep an updated home inventory with photos, receipts, and descriptions of your possessions. This will make it easier to substantiate your losses if you need to file a claim.
3. Perform regular home maintenance to prevent damage from things like clogged gutters, leaky roofs, or faulty wiring. Many policies won't cover damage that results from a lack of maintenance.
4. Choose a reputable, licensed, and insured contractor for any home repair work, whether related to an insurance claim or not. Poor quality work can lead to denied claims down the line.
5. If you suffer a loss, document the damage thoroughly with photos and videos before beginning any cleanup or repairs.
6. Keep detailed records of all your communications with your insurer, as well as any repair estimates and invoices.
By being proactive and prepared, you can help ensure smoother sailing if you do need to navigate the claims process in the future.
The Bottom Line
Deciding whether to keep your homeowners insurance claim check and do repairs yourself is a balance of several factors. While it's an option in some cases, most homeowners will benefit from allowing the standard insurance process to unfold and working with licensed, experienced professionals.
If you have concerns about the fairness of your payout or need guidance navigating the process, don't hesitate to consult with an experienced insurance claims attorney. Protecting your home and securing a full financial recovery after a loss is well worth the effort.