The payment process is the most important part of your home insurance claim. Your home insurance claim check will either be sent directly to the contractor who made the repairs to your home or to you, the policyholder. If your insurance company chooses to pay directly, you may not receive the full amount immediately. Instead, you may receive a portion of the payment and the rest after you provide further evidence of repairs to your home insurance company. In some cases, your insurance company may overpay your claim, leaving you with a surplus. You may be able to keep the surplus money in your hand on your insurance claim, but you should read and review your policy carefully first.
What is a partial claim payment?
If your home insurance company decides to pay directly, you may receive the full amount of your claim, or a portion of it. If your insurance company decides to pay a portion of your claim, you will receive a portion of the total amount of your claim up front. You may receive the remaining amount once you submit additional documentation regarding the home repair process.
Alternatively, if you receive full payment up front, you may have a surplus if the repairs turn out to be less than the insurance company’s estimate. In rare cases, you may have a surplus after some of your insurance claims have been paid. Since repair costs can vary greatly depending on current economic conditions, including labor and material costs, your insurance company’s estimate may not necessarily match the actual cost of repairs.
Will refunding my payments lower my home insurance premiums?
Making a property insurance claim can increase your annual premium when your policy comes up for renewal. However, refunding some or all of your claim will not restore your homeowners insurance to its original rate. Premiums are based on both the frequency of claims and the amount paid. Even if you refund some amount, the claim is still part of your insurance history and will appear on your CLUE report. Claims that result in larger payments are more likely to increase your homeowners insurance premiums than smaller claims, but even if you refund some money to reduce your claim, it is unlikely that you will get enough back to offset the increase in your premium.
The table below shows how the average home insurance premium changes as you file different home insurance claims: For reference, according to data from Quadrant Information Services, as of September 2024, the national average cost of home insurance is $2,286 per year for a home with $300,000 in home coverage.
| Billing Type | New Average Annual Premium | Increase from the national average |
|---|---|---|
| $12,000 wind damage claim | $2,381 | +$95 |
| $5,000 theft claim | $2,414 | +128 |
| $80,000 fire claim | $2,408 | +122 |
Additionally, it is rare to receive an overpayment on your claim. Payments are usually made in stages, with the final check being issued after the insurance company receives a Certificate of Completion to verify both the final costs and the actual repairs. You may need to provide invoices and photos showing the work completed. In some cases, the contractor may request a “payment order,” which is a request that the insurance company, not the homeowner, pay. In this situation, the home insurance company may need to verify that the work was done properly before paying the contractor the final installment.
Understanding the claims payment process
The home insurance claim payment and repair process involves several steps.
- First, an on-site adjuster will visit your home, take photos of the damage, and provide a comprehensive report to your insurance company.
- The insurance company will then determine whether the damage is covered and, if so, provide you with an estimate of the cost of necessary repairs based on your policy’s coverage limits. At that point, you may receive an upfront payment from your insurance company to begin work on repairs to your home.
- Once the work is complete, you will submit a Certificate of Completion (COC) proving that funds have been used to complete the necessary repairs. Once the repairs are complete, your insurance company will begin paying the remaining balance.
- When filing a claim for personal property, you’ll need to explain whether you have Actual Cash Value (ACV) insurance or replacement cost coverage. The first claim check for damage to personal property is made against the ACV. With replacement cost coverage, once you’ve purchased a new item to replace one damaged or destroyed by a covered peril, you can provide proof of purchase to receive a second payment for the remaining amount, and the item will be covered at replacement cost value.
Also, keep in mind that your deductible will be deducted from the bill you receive from your insurance company. Typically, you pay the deductible to the contractor who completes the work, and the rest is paid by your insurance company. Having a higher deductible will usually save you money on your annual premiums, but it will mean you end up paying more out of pocket after a claim.
Failure to complete repairs prescribed by your insurer may result in future claims being denied or your insurance being cancelled, as insurers have a legal obligation to provide coverage to restore the premises to its original condition before loss or unrepaired damage increases the risk of further costs and liability issues.
read more: What to do if your home insurance claim is denied
What about paying for home insurance instead of repairs?
If your home is a total loss, your home insurance company may offer you a cash settlement rather than repair costs. For example, if your home is completely destroyed in a fire, you may be able to get paid out based on the value of your home. However, not all insurance companies offer this.
Is there a deadline for using my payment?
The deadline for receiving your claim will vary depending on your home insurance policy. This is most relevant for policies that include replacement cost. Your first payment will be based on actual cash value. You won’t receive your final payment, which will include the full replacement cost, until you provide a Certificate of Completion showing that you’ve properly updated those items. This process can take several months, but you should check with your insurance company to make sure you’re following their requirements.
Although rare, there may be situations where you end up with money left over from your insurance payout. The adjuster’s estimate takes into account the current market rates for labor and materials. However, the actual figures can vary, and you may end up with small savings over the course of repairs. In these situations, it’s best to check with your insurance company about what to do. If you have a mortgage on your home, your insurance check may be made out to both you and your mortgage lender. Dealing with the excess is a little trickier, since you’ll need your mortgage lender’s permission to cash the check and return the excess. If your insurance payout is made via direct deposit, you may be able to write a check to your insurance company or wire the excess directly. Still, you should talk to your insurance company about the excess to understand the correct course of action.
Your insurance policy may specifically state what to do in this situation, and some insurers may even have specific language requiring the policyholder to return the excess.
FAQ
Methodology
Bankrate uses Quadrant Information Services to analyze September 2024 rates for every zip code and insurer in all 50 states and Washington, D.C. Rates presented are based on married male and female homeowners with no claims history, good credit and the following coverage limits:
- Coverage A, Residential: $300,000
- Coverage B, Other Structures: $30,000
- Coverage C, Personal Property: $150,000
- Coverage D, Loss of Use: $60,000
- Coverage E, Liability: $500,000
- Coverage F, Medical Expenses: $1,000
Homeowners also have a $1,000 deductible, a $500 hail deductible and a 2 percent hurricane deductible (or the next closest deductible available), if separate deductibles apply.
These are sample rates and should be used for comparison purposes only. Estimates will vary.
Claims: The fee was calculated based on the following insurance claims assigned to the homeowner: “fire ($80,000 loss), theft ($5,000 loss), and wind damage ($12,000 loss).”
