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When your insurance carrier approves your homeowners insurance claim and provides you with funds, it can be a major relief. If you have enough coverage, your insurance provider will cover the repairs to your home or pay to replace it entirely. But sometimes, your home repairs cost less than the total claim amount.

If your home repairs come in under what the insurer provided, you may wonder if you have to return the home insurance claim money.

Here’s what you need to know about keeping home insurance claim money:

Can I keep the money from an insurance claim?

If your insurer pays you directly and a home repair costs less than what it gave you, generally, you can keep the leftover money. But before you do, check your insurance paperwork to ensure there’s nothing in writing stating that you must return unused money.

Important: Always be honest with your insurer. Misrepresenting the facts is insurance fraud.

Keep in mind that you may not have control over the claim payout. If you have a mortgage lender, your insurer may send the check to your lender instead. The money may also go directly to the contractor you hire for repairs. In either of these scenarios, you won’t have access to the money, and you likely won’t be able to keep any leftover cash.

When would I get leftover insurance claim money?

If you receive the insurance claim check directly and are able to hire your own contractors, you can choose to hire contractors that cost less or use cheaper materials than what your insurance adjuster quoted.

Good to know: A claim check for additional living expenses (such as temporary housing while your home is being repaired) should go directly to you. If your insurance carrier approves your claim and covers additional living expenses, you’ll have control over this money. So, if you end up spending less than the amount provided, it may be easier to keep this money than it would be to keep the leftover insurance funds for repairing the structure of your home.
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How does the insurance claim payment process work?

In order to receive any money from your insurance carrier, you’ll need to file a claim. Here are the steps in the claim payment process:

  1. Assess the damage. Look at the damage to your home and take detailed notes and photos of what you see. This will help you file an accurate insurance claim.
  2. File a claim with your insurance provider. You can typically do this online, over the phone, or through your insurer’s mobile app (if it has one). Be sure to include specific details, including a list of what was damaged and any pictures you took.
  3. Make temporary repairs if needed. You may need to take necessary precautions to prevent further damage to your home. Make temporary repairs that’ll keep you and your home safe, but avoid making any permanent repairs until after your insurance adjuster has inspected the damage. Be sure to keep receipts for any repairs you make, since your insurance carrier will likely reimburse you for these.
  4. Wait for the adjuster to inspect your home. Your insurance provider will send a professional adjuster to inspect the damage and determine how much it’ll cost to repair or replace. The estimated amount for repairs is often based on your policy and limits.
  5. Receive your insurance payment and hire contractors. If your insurer approves your claim, you should receive a payment so repairs can begin. Keep in mind, you may receive multiple payments from your homeowners insurance carrier (the first check may be an advance on the total settlement) or your insurance carrier may pay contractors directly for the work.

Learn More: Everything You Need to Know About Home Insurance Claims

Who gets the money from a homeowners insurance claim?

Claim checks for your home and personal belongings may be made out directly to you or to your lender, if you have a mortgage.

Most lenders like to be included on the homeowners insurance policy as well. This allows them to ensure repairs are being made. Your lender may place the money into an escrow account and pay for the repairs when they occur.

Other times, your insurance carrier will pay your contractor directly for home repairs. If the contractor asks you to sign a “direction to pay” form, this means they intend to bill the insurer and receive payment directly from insurance. If this is the case, make sure that you carefully review the work they do and that you’re satisfied with it before the contractor bills your insurance provider for payment.

Keep in mind: If you have replacement cost coverage for your personal items, you’ll need to replace the damaged items before the insurance carrier will pay for them. You’ll have a specified time frame to do this, but if you choose not to replace the items, the insurer will pay you for their actual cash value.

Leftover home insurance claim money isn’t a guarantee

Keeping any leftover money from a home insurance claim is certainly possible, but it’s often wishful thinking. If you have a mortgage, you won’t have much control of the money if your lender has to endorse the check as well.

Plus, the main goal with the insurance money is to pay for repairs to restore your home so you can live comfortably in it again. If you do receive leftover money after the claim, consider it an added and unexpected bonus.

Insurance claim money FAQs

Here are the answers to some commonly asked questions about insurance claim money.

What happens if I accept a settlement amount and more damage is found later?

If you or a contractor notice additional damage to your home from the same covered peril you accepted a settlement for, let your insurer know right away. You should be able to reopen the claim and ask for an additional amount. You can usually reopen a claim as long as it’s within one year of the original claim date.

What is recoverable depreciation?

Recoverable depreciation is the difference between the replacement cost of an item and its actual cash value (ACV). ACV is how much an item or property is worth today minus depreciation.

Each year, the things you own depreciate in value. This means if your home insurance policy provides actual cash value coverage, you could receive less of a reimbursement for items due to recoverable depreciation.

If you have replacement cost value (RCV) coverage, your insurance carrier will pay to repair or replace the damaged items or property without deducting for depreciation. You must submit evidence that the damaged property has been repaired or replaced before you can receive the full replacement cost from your insurer.

Can I dispute the claim amount?

Yes. If you feel the insurance adjuster’s recommended amount for repairs and replacement came in too low, you can discuss this with your insurance provider. Reach out to the claim department manager, and consider gathering bids from other contractors to support your argument.

If you still can’t come to an agreement with the insurance carrier, you can seek an independent appraisal for the loss. You and your insurer will each hire an independent appraiser, and these appraisers will select a mediator to help you come to an agreement. The decision of two out of these three individuals is final.

Further Reading: How to Dispute a Denied Home Insurance Claim

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About the author
Choncé Maddox Rhea
Choncé Maddox Rhea

Choncé is a personal finance freelance writer who enjoys writing about mortgages, student loans, and helping people achieve financial wellness. Her work has been featured on sites like Business Insider, Lending Tree, Fox Business, RateGenius, and more.

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