When dealing with disaster you want to get back to normal living as soon as possible. During the recovery process you may be getting multiple checks from your insurer to cover costs of temporary repairs, permanent repairs, and replacement of belongings that were destroyed. Knowing where your funds will be delivered and what you should do with them will be the key to getting your home back on track.
What Happens First
- Filing your claim starts the insurance process.
- An insurance adjuster will visit your home to assess the extent of the damage and to determine what money should be paid for repairs based on the terms and limits of your homeowners policy.
- You may receive your first check from your insurance company. Typically this is an advancement check against the total settlement amount. Sometimes adjusters may offer an on the spot settlement check you can accept right away. If more damages are found later you can submit a supplemental item to the claim and file for the additional amount.
- Funds will arrive in the form of a check for the various needs covered under your insurance. Personal belonging and home damage compensation will be sent in two separate checks. In addition, if you had additional flood insurance you will receive a separate check as well. Additional Living Expenses (ALE) will also be covered in another payment if you are forced to live outside your home while repairs are being made.
How Does Everyone Get Paid
- In a home with a mortgage, typically checks will be written out to both you, the contractor, and your mortgage lender. These lenders hold financial interest in your property and thus want to ensure that repairs are made.
- Some lenders may put the money in an escrow account and pay for repairs as the work is completed. Sharing the contractors bid will be necessary to begin work if your mortgage is involved. Your lender may also want to inspect the finished job before allocating final funds to the contractor.
- Sometimes contractors may ask that you sign a “assignment of rights.” This allows the insurance company to communicate and pay the construction firm directly. Be sure you read the document carefully to understand if you are signing an “assignment of rights” or a simple “direct pay”. A direct pay agreement is simply for direct payment from the insurance to the contractor which can simplify things for you. An assignment of rights is signing your rights to the contractor for the life of the claim. This gives them the ability to control the claim, payment direction, and inquire as to any question on your policy to speed up the process. There are advantages and disadvantages to both. Your ultimate goal should be to vet your contractor in depth through online reviews and references before you sign either of these documents.
- When a job is finished be sure to make certain everything has been done to your satisfaction before letting your insurer make the final payments to the contractor. You should be signing a “Certification of Completion” for both the completion of the initial drying and for completion of the repairs.
With disaster, it is in your best interest to initiate your insurance claim as soon as possible. Knowing what checks will come in and how to pay contractors is an important step to getting your home repaired in a timely manner. If you have any questions about allocation of funds for your claim, contact your insurance provider.