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Can you keep the money from an insurance claim?
Technically, any leftover home insurance claim money is yours as long as the payout was used for its intended purpose, your insurance company doesn't ask for it back, and you didn’t do something shady like submit a false claim.
If your insurance company pays you directly after a loss and nothing is written into your policy about returning leftover claim money then yes, you may very well be able to keep the excess amount.
If the settlement amount is significant or used for, say, a complete rebuild of your home, your insurance company may request an inspection of the premises to ensure claim funds were used for the required repairs. If the settlement was used appropriately and you have leftover money, your insurer may let you pocket the remaining amount, assuming you don’t have an exclusion in your policy that forbids you from doing so.
How does the home insurance claim payment process work?
The homeowners insurance claim payment process will look a little different from company to company, but you can generally expect the following:
1. A damage assessment and estimate
Once you file a homeowners insurance claim, your insurer may send an adjuster to your home to inspect the damage and make sure everything on your claim is covered by your policy. Once the damage is assessed, the insurance company will send over a damage estimate.
You can either approve of the settlement amount or dispute it if you suspect that they underestimated the damage. If you feel you’re being lowballed by your insurer, having a separate damage estimate from a licensed contractor will improve your chances of increasing your claim payout.
2. Your initial claim payment isn’t final
Once you’ve agreed to a settlement amount, your insurance company will send the payout to either you, your mortgage company, or your contractor (more on this below). There’s a chance your insurer will only pay out a portion of the claim initially, as an advance against the total settlement. Oftentimes, this amount is made for temporary repairs or cleanup before the larger repairs or rebuild process begins.
3. You’ll receive multiple checks for claims involving different parts of your policy
You’ll often receive multiple settlement checks for different parts of your policy for which you’re filing a claim.
Let's take a look at an example.
For claims involving the structure of your home, you’ll receive a separate check for repairs or a rebuild up to the dwelling coverage limit in your policy.
If the same claim involves damage to your personal belongings and additional living expenses, you’ll receive two more separate checks under the personal property and loss of use provisions in your policy.
Who gets the money from a homeowners insurance claim?
Insurance checks for losses involving your personal belongings and additional living expenses are typically made out to you, but claim payouts involving your home work a little differently.
In many cases, your mortgage lender or repairs company will be the recipient of your home insurance claim money — not you. This will depend on the insurance requirements in your mortgage contract and the details of your policy regarding how claims are paid out.
Many lenders will actually require that they be named as a loss payee on the insurance policy. If that’s the case, your lender will generally place any claim money into an escrow account and pay the contractor as repairs are completed.
Your insurance company may also pay the contractor directly after a homeowners insurance claim. Some builders and repairs companies may ask you to sign what is called a “direction to pay” form that allows your insurance company to pay them directly, according to the Insurance Information Institute. [1]
If you’re asked to sign something of that nature, make sure you’re not handing control of the entire claim over to your contractor.
Can I do my own insurance repairs?
In most cases, it's up to your home insurance company and mortgage lender if you're allowed to make insurance repairs yourself instead of hiring a licensed company.
Can I keep insurance money for my roof?
You might be able to keep insurance money for your roof if your claim payout was more than the cost of your roof repairs — it all depends on your insurer's policies. Just keep in mind that many home insurance companies pay your contractor or builder directly for repairs covered by your claims payout, so you might not have access to the money yourself.
