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An adjuster will inspect the damage to your home
and offer you a certain sum of money for repairs. The first check you
get from your insurance company is often an advance against the total
settlement amount. It is not the final payment.
If you're offered an on-the-spot settlement, you can accept the check
right away. Later on, if you find other damage, you can "reopen" the
claim and file for an additional amount. Most policies require claims to
be filed within one year from the date of disaster.
When both the structure of your home and personal belongings are
damaged, you generally receive two separate checks from your insurance
company, one for each category of damage. You should also receive a
separate check for additional living expenses that you incur while your
home is being renovated.
Structure
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If you have a mortgage on your house, the check for repairs will
generally be made out to both you and the mortgage lender. As a
condition of granting a mortgage, lenders usually require that they are
named in the homeowner’s policy and that they are a party to any
insurance payments related to the structure.
The lender gets equal rights to the insurance check to ensure that the
necessary repairs are made to the property in which it has a significant
financial interest. This means that the mortgage company or bank will
have to endorse the check. Lenders generally put the money in an escrow
account and pay for the repairs as the work is completed. You should
show the mortgage lender your contractor's bid and let the lender know
how much the contractor wants up front to start the job. Your mortgage
company may want to inspect the finished job before releasing the funds
for payment to the contractor.
Some construction firms require you to sign a form that allows your
insurance company to pay the firm directly. Make certain that you're
completely satisfied with the repair work and that the job has been
completed before you let the insurance company make the final payment.
Remember, you won't receive a check for the repair job. The construction
firm will bill your insurance company directly and attach the "direction
to pay" form you signed.
Bank regulators have guidelines for lenders to follow after a major
disaster. If you have any questions contact your state banking
department.
![]() Personal
belongings
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The first step is to add up the cost of everything inside your home that
has been damaged in the disaster. Now is the time to review your
personal inventory, to help you remember the things you may have lost.
If you don’t have an inventory, look for photographs or videotapes that
picture the damaged areas. For expensive items, you may also contact
your bank or credit card company for proof of purchase. When making your
list, don’t forget items that may be damaged in out of the way places
such as the attic or tops of closets.
If you have a replacement cost policy, you will be reimbursed for the
cost of buying new items. An actual cash value policy will reimburse you
for the cost of the items minus depreciation. Regardless of which type
of policy you have, the first check will be calculated on a cash value
basis. Most insurance companies will require you to purchase the damaged
item before they will reimburse you for its full replacement cost.
If you have financed your home, your bank may have received a check for
both repairs to your home and your possessions. If you don't get a
separate check from your insurance company for your belongings, ask the
lender to send the money to you immediately.
If you have a replacement cost policy, you may be required to buy
replacements for items damaged before your insurance company will
compensate you. Make sure to keep receipts as proof of purchase.
If you decide not to replace some items, in most cases you’ll be paid
the depreciated or actual cash value of the items that were damaged. You
don't have to decide what to do immediately.
Your insurance company will generally allow you several months from the
date of the cash value payment to replace the item. Ask your agent how
many months you are allowed before you must replace your personal
possessions. Some insurance companies supply lists of vendors that can
help replace your property.
![]() Additional
living expenses
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Your check for additional living expenses should be made out to you and
not your lender. This money has nothing to do with repairs to your home
and you may have difficulty depositing or cashing the check if you can't
get the mortgage lender's signature. This money is designed to cover
your expenses for hotels, car rentals and other expenses you may incur
while your home is being fixed.
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Options for rebuilding
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If your home has been destroyed, you have several options:
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Rebuild your home on the same site.
The amount of money you’ll have to rebuild your home depends on both
the type of policy you bought and the dollar limit specified on the
first “declarations” page of your policy. Generally, you are
entitled to the replacement cost of your former home, providing that
you spend that amount of money on the home you rebuild. Remember,
your insurance policy will pay to rebuild your home as it was before
the disaster. It won’t pay to build a bigger or more expensive
house. A similar rule applies to repairs.
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Decide not to rebuild or to rebuild in a
different location.
The amount you’ll get from your insurer will be determined by your
policy, state law, and what the courts have ruled on this matter. If
you decide not to rebuild, review your policy and ask your insurance
agent or company representative what the settlement amount will be.
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