If your home is damaged and you file a homeowners insurance claim, you’ll be compensated for your losses, but the money may not all come in one payment. Under some circumstances, the funds may be directed to a third party.
How Your Insurance Company Can Pay for Repairs
The contractor you hire may ask you to sign a form authorizing the insurer to send payment for repairs directly to the contractor. Read the document carefully and contact your insurance company if you have any questions.
If you have a mortgage or live in a condominium, you may have been required to list the lender or management company as a co-insured when you took out your homeowners insurance policy. If a check is sent to you, the other party may have to endorse it before you can cash it. In some cases, a lender may put funds in an escrow account to pay the contractor.
You may receive two or more partial payments. If you accept a settlement, then discover additional damage later, you will be able to amend your claim and seek compensation for those other losses.
What May Happen If Your House is Destroyed
If your home gets completely destroyed by a covered peril, the insurance company may pay you an amount equal to the limits of your policy. The terms of your mortgage may require you to use some of the money you receive to pay off the remaining loan balance.
What will happen to the rest of the funds will depend on how you decide to proceed. For example, you may choose to build a new house on the same lot or in a different place, or you may decide to purchase an existing home, rather than build a new one. Your state’s laws may affect your options and the way that payments are handled.
How You’ll Be Reimbursed for Additional Living Expenses
If you can’t live in your house while it’s being repaired, you will have to submit receipts for a hotel or rental property, restaurant meals and other living expenses to the insurance company to get reimbursed. That payment will be sent directly to you since those expenses have nothing to do with home repairs.
How You Will Be Compensated for Personal Belongings
When you file your claim, you’ll have to provide your insurer with a list of items that were damaged or destroyed. Even if your policy covers replacement cost, you will be compensated based on cash value first. Then, if you replace those belongings with comparable ones and submit receipts, the insurance company will reimburse you for the difference. If you don’t purchase replacement items, you’ll only get cash value.
How Long It Will Take to Be Paid
Some states require insurance companies to make payments within specific timeframes, and others don’t. You may receive multiple payments at different times. You’ll get paid faster if you choose electronic transfers than you will if you have the company mail checks.
