How are homeowners insurance claims paid

If the worst were to happen and we’re forced to use our homeowners insurance, one of the first things on most of our minds is how long will it take to get an insurance check. The process of how they are paid out might be on your mind as well. Your insurance company wants you to get back in your home as much as you do. Working with them to finish the process more effectively is always the best route. In this article we go over some of the basics on how claims are paid.

Initial insurance payments aren’t always final

Typically an adjuster will inspect your home and the damage and offer you a certain sum of money for the repairs. This is usually based on the terms and limits of your home insurance policy. The first check the insurance company sends out is usually an advance against the total settlement. This isn’t a final payment. You may also have the option to take an on the spot settlement and if you chose to go this route a check is issued immediately. If later into the rebuild or repairs you determine there is more work to be done, you can reopen the claim. At this point you will be able to file for additional funds. The majority of homeowners insurance policy require you file for the additional funding within a year of the event.

The homeowners insurance company will send multiple checks

With home insurance there are different coverages within your policy that cover you for different things. Part of the policy may cover the structure of the home. Another part of the policy might cover your personal belongings within the home. Because of this reason there is a really good chance you will receive multiple checks. One check may come for the damage to the structure of the home and one check may come for your personal belongings. 

In addition, you may have to tap into the additional living expenses (ALE) portion of your policy if the home is inhabitable. This coverage protects you for any additional expenses that you may incur from living away from your home. More than likely a separate check will be issued for this as well.

If you carry earthquake or flood insurance. These are two insurance types that don’t come standard with your typical homeowners insurance policy. You should expect checks to be issued differently with these insurance types as well. 

The mortgage company could have control over the payment

Typically when you carry a mortgage on your home the mortgage lender requires you have homeowners insurance. If this is the case for you, you should expect a check to be issued to the mortgage company and to you as well. Most mortgage companies ask that they be named on the homeowners insurance policy and that they are a party to any insurance payments paid for the structure of the home. 

If you live in a condo the management company may require that they are named as a co-insurer. The lender wants to know that the necessary repairs are to the home to protect their investment. 

When there is a financial backer involved, they will have to endorse the the payments claim checks. You may not be able to cash until they have approved it. There’s a always the chance the lender puts the money into escrow and just pays for the repairs and rebuild from there. 

If the house is completely destroyed the total settlement amount and who is paid is all determined by the home insurance policy type. As an example a portion of the proceeds might be used to pay for a balance due on a mortgage loan. What remains of the payout benefit would be left to your discretion. You may want to rebuild on the same lot, you may want to move the home and there’s always the chance you don’t want to rebuild at all. State to state rules surrounding this can differ. Please reach out to a local agent to get clarification on what’s the norm for your state. 

If you live in California and have questions regarding your home insurance, please give us a call. Our agents are experts when it comes to homeowners insurance and would love to help you find a better rate on your home insurance policy. Call us today 916 313 6100

The homeowners insurance company may pay the contractor directly

There are some contractors that will ask you to sign a direction to pay form. Which will allow the home insurance company to pay the firm directly. Please be sure to read this form thoroughly as it is a legal document. You should always check to insure you aren’t assigning the entire claim balance to the contractor. If this were to happen it would remove you from the decision making process and give full control to the contractor. 

After the work is complete for the rebuild or repairs. Make sure to check the work and make sure it meets your expectations. Once this is done the insurance company will have issued the final payments to your contractor. 

Additional living expenses (ALE) checks should be written to you

Additional living expenses insurance usually has nothing to do with the repair or rebuild of the home directly. Because of this all proceeds should be issued to you personally. Additional living expenses insurance covers hotel stays, additional costs associated with eating out and car rental that may be necessary while your home is being rebuilt or repaired. 

Personal belongings will be calculated on cash value first

You may want to make sure you take a thorough home inventory when you first get your home insurance policy. More than likely if something were to happen the home insurance company would require you to provide a list of all the damaged items. 

The first check you’re going to receive from the home insurance company will be based off the cash value of your items, regardless of having current replacement value. The cash value is based off the depreciated amounts of the items. This is so that the insurance company can match the exact replacement cost to the remaining claim payment. So if you decide not to replace an item you will be paid the actual cash value, the depreciated amount.

If you want the replacement value of your belongings you will have to personally replace them

Typically home insurance companies will require you to buy the items if you want them replaced. They may also ask for recites to show proof of the replacement. From there you would pay the difference between the cash value and the total cost of the replacement item. 

In the event of o total loss, when the home is completely destroyed the insurer usually pays the policy limits. This is always according to the state laws of the state you live in. So you may receive a check for the home & the contents that were insured at the time. 

If you have additional questions regarding homeowners insurance and live in California, give us a call! The agents at Eugene C Yates Insurance Agency are nice people and they have great rates on home insurance! Call us today 916 313 6100