Can I Keep My Homeowners Claim Check & Make Repairs Myself?

When your home experiences damage, receiving an insurance claim check raises questions about managing repairs. Many homeowners consider undertaking the work themselves, hoping to save costs or gain more control. Homeowners insurance helps restore a property to its pre-loss condition, providing financial assistance for covered damages. Self-repair involves understanding policy provisions and financial considerations, requiring careful planning to ensure proper restoration and meet all insurance requirements.

Understanding Your Insurance Claim Check

Homeowners insurance claim checks are issued in different ways, depending on the policy and the nature of the damage. Checks might be made out solely to the homeowner, to the homeowner and a designated contractor, or to the homeowner and their mortgage lender. For instance, checks for personal property damage are typically made out directly to the homeowner.

Insurance payouts distinguish between Actual Cash Value (ACV) and Replacement Cost Value (RCV). ACV represents the depreciated value of the damaged property, accounting for age and wear and tear. RCV covers the cost to repair or replace the damaged property without deducting for depreciation. Insurers often issue an initial check for the ACV, holding back depreciation until repairs are completed and documented. This held-back amount is known as recoverable depreciation.

Homeowners insurance policies aim to restore your property to its condition before the damage occurred. While policies rarely explicitly forbid self-repair, they require repairs to meet certain standards. Communicate your plans for self-repair with your insurer, as this transparency can streamline the process for releasing any held-back depreciation once the work is verified.

Involving Your Mortgage Lender

Mortgage lenders play a significant role in the insurance claim process, especially for substantial damages. Lenders have a financial interest in the property because it serves as collateral for the loan. For dwelling damages, insurance claim checks are frequently made out jointly to both the homeowner and the mortgage lender.

When a check is issued jointly, the mortgage lender often holds the funds in an escrow account. The lender releases these funds in installments as repairs progress, often after inspections verify completion. A common disbursement schedule involves releasing an initial portion to begin repairs, a second portion upon 50% completion, and the final amount once repairs are 100% finished. To facilitate these releases, lenders typically require specific documentation, including contractor estimates, W-9 forms, contractor licenses, receipts for materials, and inspection reports. Some lenders might also require a notarized repair affidavit.

Communicate proactively with your mortgage lender to understand their requirements and fund release procedures. This is especially true if you plan to perform the repairs yourself. Engaging with their “Loss Department” or similar specialized unit early can help avoid delays. Procedures vary based on the claim amount, with larger claims often requiring more stringent monitoring and documentation.

Proceeding with Self-Repairs

After understanding your insurance policy and mortgage lender requirements, self-repairs demand meticulous attention to detail. Thorough documentation is paramount. This includes detailed work logs, before-and-after photographs, and retaining all material receipts. This documentation is essential for demonstrating to the insurer and lender that repairs were completed adequately, especially when seeking the release of held-back depreciation.

Maintain open communication with your insurance company as repairs near completion. The insurer may require a final inspection to verify the work and confirm property restoration. This verification is necessary before the release of the final RCV payment, which includes recoverable depreciation.

Perform repairs to a professional standard to prevent future issues and ensure continued insurance coverage. Adhere to local building codes and secure any required permits. Failure to obtain permits or perform work to code can impact future claims or lead to denial of coverage if subsequent damage arises from unpermitted work. Once documentation and inspections satisfy the insurer, the final RCV payment will be disbursed.