Dual Roles: Homeowner and Contractor
You can typically use your insurance claim reimbursement to do repairs yourself as a homeowner or contractor, but there are some crucial things to keep in mind. Even for policyholders with professional repair skills, the vast majority of insurance policies do not forbid policyholders from doing their own repairs. However, this condition produces new challenges that need careful handling.
Insurance Provider Expectations
No matter who does the work, insurance companies usually pay out claims based on material costs and normal labor rates. In most cases, when you get a payout, the insurance company won't say who has to fix your property; all they ask is that it be returned to how it was before the loss, according to their estimate.
Documentation Requirements
To protect yourself, maintain thorough documentation of:
- Material purchases with detailed receipts
- Time spent on repairs (tracked systematically)
- Before, during, and after photos of all work
- Permits obtained for structural work
- Any subcontractor invoices if portions are outsourced
This documentation demonstrates the proper allocation of funds and completion of necessary repairs.
Financial and Tax Considerations
When using the labor component of an insurance payout for work that you did yourself, you may need to think about taxes. In a sense, this is like paying yourself for your efforts; so, it may be considered money. Go to a tax professional if you want to know the ins and outs of declaring and accounting for potential business revenue.
Mortgage Lender Requirements
If your home has a mortgage, your lender may have specific requirements regarding insurance claims. Some lenders require professional contractors for certain repairs or may need to endorse insurance checks above certain thresholds. Review your mortgage agreement or contact your lender directly.
Permit and Code Compliance
Even as a qualified contractor, you must obtain all necessary permits and follow local building codes when performing repairs on your own property. Insurance settlements often include code upgrade allowances that you're entitled to utilize regardless of who performs the work.
Warranty Considerations
Consider how you'll handle warranty issues for your self-performed work. Professional contractors typically provide warranties on their repairs, a protection you'll need to self-manage when doing the work yourself.