Once your home insurance company has approved your claim, the next step is to receive the actual compensation. Many people assume that the insurance company will simply send them the compensation check. That is sometimes, but not always, true. Below are some things you should know about home insurance claim payouts.
You may receive multiple checks from the insurance company, depending on your loss. Consider serious home damage that:
- Damages your home’s structure
- Damages your personal belongings
- Requires you to vacate the home for some time
In such a case, you may receive a separate check for:
- The structural damage
- Content damage
- Additional living expenses (ALE)
In short, you may receive a separate check for each category of loss that your policy covers.
Your policy and homeownership structure determines who gets your insurance payouts. In some cases, you might have multiple payees for the same claim. Below are some of the possible payees.
As the homeowner, you may be the sole payee for the checks. This form of payment is especially true for ALE payments and content damage compensation. You may also receive the structural damage compensation directly, depending on your insurance policy.
Home insurance compensation compensates everyone with insurable interest on a damaged property. Thus, the check will have both or all of your names if you co-own the property with another party. For example, if you bought the house with your parents, the compensation check will have all your names.
Homeowner and Mortgage Company
Mortgage companies require homeowners insurance to protect their interests. Many lenders even insist on their names being in home insurance policies. The insurance company will include the lender’s name and your name on the money meant for repairs in such a case. Your agreement with the mortgage company then determines how you can cash the check.
The Building Contractor
The contractor’s name can be on the compensation check via two main routes. First, the contractor’s name may be on the check if you are still servicing your mortgage. The arrangement makes sense since some lenders require an approved contractor to get their pay directly from the home insurance company.
Secondly, some contractors wish to receive their pay directly from the insurance company and not the homeowner. In such a case, your contractor may ask you to sign a form that transfers the insurance company’s payment obligations from you to the contractor.
The Coop or Management Company
If you are part of a coop or condominium, then the relevant management company may also have their name on the check. Such an arrangement is common with damages that affect parts of your house under the management company’s control.
The insurance company might not release all the payments at once. You may receive payments on different dates under two different circumstances.
First, the insurance company may release staggered payments to the contractor if the contractor receives direct payments from the carrier. The money might sit in an escrow that allows the periodic contractor withdrawals as the work progresses. Such an arrangement is possible, say if the lender wishes the contractor to get direct payments.
Secondly, you may also receive staggered payments if you have a replacement policy for your home’s contents. The carrier will first pay you the actual cash value of the damaged contents. Then, you decide whether to replace the items or use the money for other things. If you replace the items, you send the receipts to the carrier for the rest of the payout.
Note that you will only receive compensation if you have relevant coverage for the damage. Contact Metropolitan Insurance Service Consultants, Inc., to help you buy adequate coverage and protect your home.