So you’ve successfully filed a home insurance  claim and your insurance company has accepted and agreed to compensate your losses. Congratulations and certainly you feel relieved!
Now the real work begins. Although finding your way through the confusing and sometimes frustrating claims process is behind you, the details of repairing or rebuilding your home still remains.
As a homeowner, receiving your claim settlement payment and managing contractors can be emotionally grueling, especially after suffering a fire, theft or other insurable peril!
Read on to learn some ways to ease the process of rebuilding or making needed repairs to your home following your claim settlement.
Homeowners Insurance Claims Settlement Payment
After your insurance company agrees to pay your claim, it generally has five days to make the settlement payment.
If, like most homeowners, you have secured your mortgage with a lien against the property in your lender’s name, a large settlement payment will in most cases be made to you and your Mortgage Company collectively per the terms and conditions of most mortgage loans. This is intended to assure your lender
that your home is brought back to good condition and the value of your property is kept intact.
If your payment is made out to you and your lender, you will need to get their endorsement and, depending upon their policies and the guidelines specified by your state’s bank regulators, may or may not agree to release the funds until a satisfactory inspection of the repairs is completed.
Check with your lender to get details on how they process insurance claims settlement payments and remember that they will be just as eager as you to see the repairs or rebuilding completed as quickly as possible.
In most cases your lender agrees to make deposit and progress payments directly to your contractor(s) as the repairs or rebuilding progress using a “direction to pay” form, in which case your contractor(s) bill the insurer.
It is important that you fully understand how this process works and do not sign off on any work until you are satisfied that work has been completed according to the estimate and specifications of the contract(s).
If your policy covers replacement cost for personal belongings, generally you will be required to replace stolen, damaged or destroyed items prior to receiving payment from your insurer; they want to be sure you actually replace the items and not simply pocket the cash. Most insurance companies allow several months for you to replace items but check with your company to be sure you understand the process and time limit.
Managing Home Repairs or Rebuilding Following a Claim Settlement
If your home has been damaged or destroyed by an insurable natural disaster, then it is likely your insurance company and local contractors will be swamped with claims and jobs to manage.
If your company offers you a settlement right away, you can accept the payment and still reopen the claim later if actual repair or rebuilding costs are higher than originally estimated. In most cases, local, state or federal government officials will also make available people with whom you can consult about the claims and rebuilding process. Take advantage of such emergency services if available.
Regardless how your home was damaged or destroyed, you will be able to choose the contractor(s) that do the work. As with any construction project, a good general contractor should manage all subcontractors, scheduling, inspections and other details required to complete the work.
Be sure you get bids and references from several contractors for comparison before making a selection. Always be certain your contractor(s) are licensed in your state to complete the work required and that they have workers’ compensation insurance covering all workers on the jobsite.
You want to be sure that materials used are of the same quality as those with which your home was originally built; if you decide to use less expensive materials you will not have the option of pocketing the cash difference. If building codes changed, repairs or new construction must meet current building codes.
If you home was completely destroyed, you have the option of rebuilding in the same location or, if your state insurance laws permit, selling your land and electing to rebuild in another location.
In some cases, you may also have the option of renting rather than rebuilding, which might make sense if you are unsure whether or not you wish to remain in an area following a natural disaster! Check with your state insurance department.
Home Insurance Rebuilding and Repair Tips
It is not advised to make major repairs yourself if you have received a settlement payment from your insurance company as this complicates the settlement payment process and often prolongs the rebuilding or repairs.
If you live near water, you should definitely consider flood insurance since standard homeowner’s policies do not cover flood damage. Same goes for earthquake coverage; if you live in an area prone to earthquakes, many insurers do not cover damage caused by earthquakes so check to see if special coverage is available.
Remember to keep all receipts for rent and other living expenses incurred if you can not live in your home during repairs or rebuilding as these should be reimbursed by your insurer as part of your settlement as additional living expenses (ALE).
Did you understand ahead of time what coverage your homeowner’s insurance included? What surprises did you encounter?
Learn from your claims process and experience; what could you have done differently to make the process better? Should you consider changing your home insurance coverage? Should you consider switching insurance companies? Are your home and family prepared for future emergencies, fire, injury or other events?