In rare instances, you may file an insurance claim only to find out that the estimate’s amount exceeded the repair costs incurred. If you’re wondering how to handle the excess funds from your home insurance payout, there are several factors to take into consideration.
Much of this depends on how the payout was handled and what type of claims were made. In some instances, your insurer may pay the contractor directly, so you wouldn’t have to worry about an excess payment. In other cases, however, you may receive a separate check for each type of damage. One might cover the estimated cost to repair your home’s structure, one might go towards additional living expenses and another may be for replacing damaged personal property.
It’s good to understand how to manage all of the funds that make up such a complex payout structure.
Why returning a payout does not decrease premiums
Filing a home insurance claim can increase your annual premium once it’s time to renew your policy. However, returning a claims payout or a partial payout won’t help return your premium to its original rate. Your premium is largely based on the frequency of claims, not the amount paid out. Even if you return some of the money, the claim is still part of your insurance history.
Additionally, receiving overpayment for a claim is rare. You may also receive payment in stages, with the final check issued after the insurance company receives a certificate of completion to confirm both the final cost and the actual repairs. You may need to provide invoices and photographs to show that the work is completed. In some cases, your contractor may request a “direction to pay,” which requests they be paid by the insurance company rather than the homeowner. In this situation, you may need to confirm the work was done properly before your insurer pays the contractor the final installment.
What to do with the rest of the payout
How does a payout work?
There are several steps that take place during the payout and repair process. First, an adjuster will come to your home and provide an estimate of the repair costs needed based on your policy’s coverage. At that point, you’ll receive an initial payment from the insurance company to start work on your home.
Once the work is completed, you’ll submit the Certificate of Completion (COC), which verifies the funds were used to complete the required repairs. If you’re covered for replacement cost value, you’re first receive payment for the actual cash value of your damaged belongings. Then once you submit the COC, your insurer will initiate the release of depreciation and pay you for the remaining balance.
Also, remember that your deductible is subtracted from the amount you receive from your insurance company. While a higher deductible typically saves you money on your annual premium………Read More>>