Making a Homeowners Insurance Claim if Doing the Work Yourself

Damage to your home can be very expensive, even if your homeowners insurance helps defray the cost of the damage. Can you save money by making an insurance claim and doing the work yourself? The short answer is that you might be able to do the work yourself, but there is no guarantee that you'll save much money by doing so. And if you're not licensed to carry out the work, you may be responsible for additional costs if the repairs don't go as well as you'd planned.

Can You Do Your Own Home Insurance Repairs?

It's largely up to your insurance company whether you're allowed to do your own home insurance repairs, since it decides how much it will pay to fix your home, and when it will pay. Most of the time, insurers will let you do the work yourself, but the amount of supervision they'll want to provide will differ by the severity and complexity of the damage and the insurer's policies. The insurer is also more likely to grant you permission if the work requires relatively little skill, such as cleaning up debris, than if it's highly technical, like plumbing.

Legality

Another concern is whether it is legal for you to do the repairs at all. Depending on the seriousness of the damage and the laws where you live, you may be required to get a permit from your city or have a license to do the necessary repairs. For example, your city may require all electrical work to be done by a licensed electrician. If you can't or don't get these approvals, you may not be legally allowed to do the repairs yourself. Check with your local department of buildings or development services to see what permissions are necessary for your repair.

Permission From Your Mortgage Lender

If you have a mortgage on your home, your lender may have a say in who performs a repair on your house, and they might not permit you to do the repairs yourself. One common clause in mortgage contracts is that your lender must be named on insurance claim checks. This is because until you've paid off your mortgage, your bank wants to make sure your house is kept in good condition in case you default on your mortgage and the lender needs to repossess it. If you have this clause in your mortgage, some or all of the funds you receive from your insurance company will have both your name and your bank's name on the check.

Usually, the bank will place the money in escrow and use the funds to pay the contractor directly once the repairs are completed. And since the bank controls the money and has an interest in making sure that your house is repaired well, it may not allow you to do the work yourself. So check with your mortgage company to see if it permits self-repairs.

Is It a Good Idea to Do Your Own Homeowners Insurance Repairs?

Even if your insurance company has given you the go-ahead to do the repairs on your home, you should seriously consider the risks and whether it's worth it to do the work yourself before committing to self-repair.

The first and most important issue is safety. There are many dangerous elements that can be involved in repairing a home. If the damage to your home relates to something like an electrical system and you're not experienced in dealing with it, you should not take this opportunity to learn—leave it to the professionals.

You should also assess whether the amount of money you'll save is worth the time and effort, especially if you are not already an accomplished DIYer. The amount your insurance company will pay you can vary a lot based on the nature of the repairs, the size of the claim and your insurer's policies. You may find that your insurance company will only pay you for the time it would take an experienced tradesperson to complete the work, even though it may take you much longer. Furthermore, it may reduce the hourly rate it pays you if you're not a professional.

Though a permit or license can be required for major home repairs, homeowners generally have more leeway than professionals about what they can do without a permit or license. But if work is done without a permit or was not done to a professional standard, your insurance company probably won't cover further repairs if something is fixed improperly. For example, imagine your fence is damaged by a falling tree and you repair it yourself. Then, if a windstorm damages the fence again and the insurance company has evidence the first repair was not done properly, it may not cover the second round of damage.

Finally, if the damage is relatively minor or cosmetic and you're considering repairing it yourself, it may be better not to file a claim at all. Even if you could get some money from your insurance company now, multiple claims in a short period can make your rates jump, costing you more money in the long run. It may be cheaper and simpler to take care of the work yourself without involving your home insurance company.

The Process of Making a Homeowners Insurance Repair Yourself

In order to understand the situations in which you can choose to repair your home yourself under a homeowners insurance claim, it's helpful to know how the claims process works when you employ a contractor. The exact procedure can vary by insurer, but the claims process usually goes something like this:

  • 1. You contact your insurance company and let it know there was damage to your home.
  • 2. A claims adjuster comes to survey the damage and creates an estimate.
  • 3. You receive a check for the actual cash value (ACV) of the damaged item. If you have replacement cost value (RCV) coverage, the ACV check acts as a down payment toward the total cost of the repair.
  • 4. You collect one or more estimates from contractors for the cost of labor and materials to repair the damage, and submit the estimates to your insurance company for approval.
  • 5. The contractor you select repairs your home.
  • 6. Either you or the contractor sends a certificate of completion (also called a letter of completion) to the insurer. If you have RCV coverage, the insurer will release the rest of the funds, also called the recoverable depreciation. You'll use this money to pay the contractor.

How Doing the Repairs Yourself Differs From Hiring a Contractor

Regardless of who's doing the repairs, your insurance company will come to inspect the damage and tabulate the value of the damaged property. The changes in process occur after your insurance company has provided you with an estimate of the costs and cuts your first check (step 3).

Once you have an estimate from your insurer, get a detailed estimate from a professional before committing to doing a repair yourself. A professional may be able to spot or anticipate damage that may not be obvious to you, even if you're an experienced DIYer. Additionally, they will come up with an authoritative estimate of the cost of the work, which will give you more negotiating power with your insurance company when settling your final payout.

Before you begin repair work on your home, make sure you understand exactly how your insurance company determines how much to pay you and when you'll receive the money. They may have a standard payout to cover a specific type of damage or calculate an hourly rate for your labor.

How a Claim Payout is Determined

Your insurer may take a very relaxed, hands-off attitude toward paying a claim and not request much information about how the money was used. Once you and your insurer have agreed on an estimated cost for a repair, it may only require proof that the work was done, such as a photograph or signed letter. Once it has received the proof, it will send you the money to cover the full cost of repair, without looking into who actually performed the repair.

In other cases, your insurance company may take a much more rigorous approach to the claim. This could include requiring a detailed estimate—or multiple estimates—from licensed contractors and detailed accounts of all the costs, such as materials and tools needed. It's also possible your insurer will manually calculate how much it will pay for labor based on established rates. If your insurance company goes this route, the dollar amount the insurance company pays may end up being substantially less if you do the work yourself when compared to having the work done by a professional, since it will often take out administrative costs from their calculations for self-repair.

Keep in mind that the more costly and complicated a claim you make, the more oversight your insurer is likely to want. An avid DIYer may be able to recarpet a room or repair a wall without much trouble, but an insurance company is more likely to want a professional to take care of a very expensive or dangerous repair like fixing a roof or overhauling an electrical system.

Be Honest and Willing to Compromise

In any case, it's best to be upfront with your insurance adjuster about your plans to do the repair work yourself. Your adjuster will guide you through the process to make sure you are compensated as simply and fairly as possible. Keep in mind that it's a crime to deliberately withhold information from your insurance company.

Doing the work yourself is not an all-or-nothing situation. The optimal solution may be for you to take care of the menial work, such as debris removal, on your own and leave the more specialized tasks, like wiring, to a professional.

Your insurance company may also be more generous in paying you for your work if you ask them to count that money toward your deductible, rather than cutting you a check.

Can I Keep Extra Homeowners Insurance Claim Money?

It's possible that you have extra money leftover from your homeowners insurance claim, whether it's because you saved money after doing the work yourself or your contractor came in under-budget. Normally, any money that you end up with is yours, so long as the company doesn't ask about it and you didn't lie or commit fraud to get it. Look over your homeowners insurance policy to see if there are any specific provisions detailing what should happen with leftover claim money.

Be honest with your insurance company. Whether you deliberately pad the bills you or the contractor sends to the insurer, or you lie and say there's no money left over, it's considered insurance fraud. Insurance fraud is a serious crime, and if you are caught, you may face prosecution and a fine or jail time. Additionally, your policy will likely be canceled, and you may get blacklisted from buying other insurance policies in the future.

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