As a homeowner, filing a home insurance claim can help keep you financially protected. But how exactly does the claims process work and how do you use the home insurance claim money? The payout from a home insurance settlement will often come in multiple checks, each with their own set of rules about who can spend them and how they can be spent. This guide to the home insurance claim process will walk you through the types of expenses your insurer might pay for, the steps to filing a claim, who the money goes to, and how any leftover money can be spent.
You will need to read your policy to find out exactly what you can claim. Home insurance policies vary widely in which expenses will be reimbursed and which disasters are covered.
The list below includes several types of coverage common to many home insurance policies. Check your policy to see if your insurance will cover:
This type of coverage will pay a certain amount of your legal fees and the judgement against you if you are sued and found liable for someone else’s injury or property damage.
Your insurance may cover the medical bills and related expenses of someone who is injured on your property or by your pets. Most policies pay only up to a certain limit and have exclusions – rules about when the insurer will not pay. For instance, many policies will not cover bites from pit bulls or injuries related to a swimming pool or trampoline.
This coverage is both more comprehensive and more limited than most people realize. Most homeowners insurance does not cover damage to your home from earthquakes, floods, sewer backups, or insect infestations. On the other hand, many policies include:
repair of the house and associated structures such as detached garages, sheds, and fences
replacement cost of trees and shrubbery
professional fire or water damage restoration
Most policies cover not only the buildings on your property but also their contents, such as:
food spoilage due to power outages directly associated with a covered disaster
professional cleaning of items damaged by water during a covered event
replacement of possessions that are stolen or beyond repair, including furniture, appliances, clothing, electronics, and household items
Also known as Additional Living Expense (ALE) coverage, it will reimburse you for the extra costs associated with maintaining a comparable standard of living when you cannot live in your house because of a disaster. For instance, if a fire leaves your house uninhabitable, most home insurance policies will pay for some of the following until your home can be repaired or rebuilt:
hotel or temporary apartment
temporary lines of communication
extra cost of eating out more frequently
car rental, if necessary
extra gas if your commute is significantly longer
loss of income directly related to the disaster and associated events (such as required court appearances)
There are generally limits in your policy about how large your ALE check can be and what expenses your insurance company will cover, so talk with your insurance agent about the details.
Yes, most insurance policies require you to notify the insurer soon after an incident, though the exact timeframe varies. This information is in your policy, and you can check with your insurance agent if you have questions. Your state may also have rules about how long after an event you can file an insurance claim.
It is in your best interest to file quickly for three reasons:
The sooner you file, the sooner you receive your settlement.
Insurers will not pay for normal wear and tear, only for the portion of damage directly caused by a covered disaster. Over time, dirt accumulation and further damage from weather can make it look like at least part of the damage was from aging or neglect. You need the insurance adjuster to see the damage as soon as possible after it occurs.
If there was a major storm that affected many houses in your area, you want to get in the queue for an insurance adjuster. Adjusters can end up booked for weeks out, and the claim process cannot move forward until they inspect your property. Contractors and building materials might also be in short supply, so it is beneficial to get the ball rolling quickly.
The process of filing an insurance claim can be time-consuming, but a careful and thorough approach can lead to a faster and more satisfactory settlement.
If a crime may have been involved, file a police report before you do anything else. This includes cases of vandalism, breaking and entering, theft, and arson. You should also notify the police department if someone is seriously injured on your property or by your pet.
Look up the non-emergency number for your local police department. Do not call 911 unless there is a true emergency, such as:
a life-threatening injury
concern that an intruder is present on the property
If a police officer comes out to inspect the damage, be present if at all possible. Answer their questions honestly and clearly. If you can do so safely, inspect your home carefully before they arrive. Take down detailed notes about any structural damage or missing or destroyed belongings you want to report to the officer.
Many insurance companies require you to make any temporary repairs necessary to protect your property from further damage. If you fail to take reasonable measures, the insurer may not reimburse you for any additional damage that occurs. Examples include:
covering a hole in the roof with a plastic tarp
boarding up broken windows
moving furniture and other items out of the path of water
cleaning up standing water
Do not, however, put yourself or anyone else in danger or attempt repairs beyond your ability. Do not make major permanent repairs until the insurance company approves them, as your insurer will not reimburse you for unapproved expenses.
You are generally permitted to make whatever temporary repairs are necessary to make the house safe and habitable. Check with your insurance agent if you have questions about what is allowable.
Do take pictures and video of the damage before starting any work. Keep receipts for all materials used to make temporary repairs, such as tarps, lumber, and hardware.
Look over your home insurance policy before you call, as it will tell you exactly how to start the process of filing a claim. As you read the policy, write down a list of questions for your insurance agent. Find out what is and is not covered and how much your deductible is.
The deductible is the amount of money you must pay for repairs before the insurance company starts paying. If the repairs and related expenses are going to cost less than your deductible, you may be better off not filing a claim at all.
If decide to file, you need only your home insurance policy and your list of questions to make the first call. You will not be expected to have all the details or documentation at this point in the process. Feel free to ask multiple questions to get a clear picture of what to expect in the days ahead.
Is there a case number for this insurance claim?
How and when will I receive claim paperwork?
How long will I have to fill out that paperwork? How do I return it?
What kinds of documentation will I need?
Will an adjuster come inspect the damage? When?
Do I need to get an estimate for repairs?
What Additional Living Expenses are covered by my policy? Do any of them need to be pre-approved?
An estimate of the actual cost of repairs can help you get a fair settlement that will restore your property with quality materials and workmanship. When inspecting the visible damage, an experienced contractor may also be able to spot hidden structural damage and provide information about other repairs that may be necessary.
For each type of repair, get a single estimate from a licensed contractor or service provider who is well known for high-quality work. For instance, if a large tree fell through your roof during a storm, you might call a tree company, a roofing contractor, and a cleaning company that specializes in water damage restoration.
If you get multiple estimates for a single repair—bids from three roofing companies, for example—the insurance company will want to see all of them. The insurer will most likely accept only the lowest bid, which may not be the best option in terms of quality.
Get a written estimate on the contractor’s company letterhead, and make sure it includes the company’s contact information. Do not commit to hire a contractor or purchase materials until you have approval from the insurance company, or you may not be reimbursed.
You will most likely only be reimbursed for what you have receipts to prove. Filing a home insurance claim can quickly become complicated, and it may be difficult to keep track of all the paperwork and conversations involved. Stay organized by collecting everything in one place.
Keep the following in a single folder or binder:
log of every claim-related interaction (phone call, email, or appointment) with the date, the name and role of the person you spoke with, and notes about what they told you and how you followed up
police department personnel
insurance agent, adjuster, other insurance company staff
contractors and service providers
contact information for the people listed above
copies of all insurance paperwork and important emails
copies of receipts for every expense you incur that is in any way related to the covered event (see list of possible claims above)
home inventory, if you have one
list of missing or damaged belongings with estimates of the original cost and age of each
repair estimates or bills
police report, if applicable
insurance adjuster’s report
copies of medical bills if someone was injured on your property or by your pet
Once you file an insurance claim, the insurance company may send an insurance adjuster to inspect your property. Make sure you are present to point out structural damage or any other areas of concern. They will ask you questions about the damage and the condition of the property before the incident. You may give them a copy of your repair estimate.
After the insurance adjuster generates a report, the company will issue a settlement – an amount of money they are willing to give you to fix or replace your damaged property.
Don’t feel pressure to accept a settlement with which you are uncomfortable. If you feel that the amount offered is too low:
First try talking to the insurance adjuster. Provide more documentation, if needed. Ask your contractor to meet with you and the adjuster to explain the costs involved.
If you are unable to resolve your dispute with the adjuster, share your concerns with the claims manager at your insurance company. Calmly offer the facts of the case and answer any questions they may have.
If you and the insurer still cannot come to terms, you have several options.
The claim process can take anywhere from a few days to several months, depending on
the type and extent of damage
how long it takes the company to get an insurance adjuster on site
how quickly you complete paperwork and respond to requests for further documentation
how easily you and the insurer come to an agreement on an appropriate amount
state laws that may require the insurer to meet certain deadlines for each step of the process
Once you and the insurer reach an agreement on the settlement and a contractor, repairs on your home can begin.
For major claims, there will usually be multiple checks issued for different aspects of coverage.
Your ALE check should be made out directly to you. The amount is often calculated by totaling the receipts you provide for each covered expense and subtracting what you would have spent had you been able to live in your home. If you normally spend $100 per week on groceries but spent $140 during the week you had to live in a hotel, you would be reimbursed $40.
Be sure to talk with your insurance before making major commitments, such as signing a lease on a temporary apartment. Temporary housing is usually covered but may require pre-approval.
These checks will likely be made out directly to you. The first check for damaged or missing personal belongings will be based on their actual cash value—their original cost minus depreciation based on their age. If your policy is for actual cash value, that will be the final check.
If you have a replacement value policy, you can purchase replacement items of a similar size and quality and submit copies of the receipts to the insurance company. The insurance company will write you a second check to reimburse you the difference between the cost of replacement and the actual cash value.
If you own your home outright, checks may be made out to you or paid directly to contractors and service providers.
If you have a mortgage, the check will be made out to you and your mortgage company. Almost all mortgage agreements require this to protect the lender.
Usually, the mortgage company will hold the settlement in an escrow account and use it to directly pay contractors and service providers. Money will be released by the mortgage company as needed throughout the repair or rebuilding process.
ALE and Personal Property checks are usually reimbursements, in which case they belong to you to spend as you please. Ask your agent if there are any restrictions on how that money is spent. Some ALE checks are not reimbursements, and you may have to account for how you used that money.
In the case of Dwelling Coverage, most insurers and lenders pay contractors and service providers directly, so you are unlikely to have much of a choice. If you are given a check with which to make repairs to your home, there are a number of reasons it would wise to complete those repairs.
It is crucial that you do not attempt to deceive your insurance company at any point of the process. This is known as insurance fraud, which is a felony.
If you choose to forego repairs or try to pocket money by skimping on the quality of materials or labor, future claims may be denied. You may lose your insurance altogether.
The reason the insurer is paying for repairs is because they are needed to maintain the condition of the house. Neglected repairs can lead to further damage, while professional repairs with quality materials can increase the value of your property.
Unless your home is a total loss, the settlement will only cover the needed repairs. In the rare case that the insurance adjuster’s estimate was high and you have extra money available, it is wise to invest that money into higher quality building materials. Talk with your contractor about how to get the most out of an expanded repair budget.
In the case of a total loss, the settlement will be the policy limit – the amount for which the house was insured. Some mortgage agreements require that part of the settlement be used to pay off your mortgage in the case of a total loss, but others do not have that stipulation.
Your homeowners insurance policy may or may not forbid you to keep any extra money. If you end up with leftover claim money, contact your insurance agent and explain the situation. Ask if there are restrictions on keeping it or what it may be spent on. If the excess home insurance payout is yours to use as you like, you will be able to enjoy it with a clear conscience.