How does the home insurance claim payment process work?

In the event that an accident affects your property and you initiate a claim, the insurer will usually send an appraiser to visit you and define the damages. The appraiser, also called an adjuster, will inspect the damage and offer you a certain amount of money to make the repairs. The first check you receive is often an advance on your total award. This is usually not the final amount of the settlement agreement.

If you are offered a check during the adjuster's visit, it's a good idea to accept it right away. If you subsequently discover additional damage that was not visible on the initial inspection, you can request that the file be reopened and seek additional compensation. Most insurers require that all claims be made within one year from the date the loss occurred. If you wish, you can consult this point with the Department of Insurance of your state.

When both the building and its contents are damaged, it is customary for two separate checks to be issued, one for each portion. If your home is mortgaged, the check corresponding to the building repairs will be issued in the name of the owner together with the name of the mortgage company. If you have also incurred additional living expenses, you may receive a third separate check for this item.

Damage to the structure of the house

If you have a mortgage on your home, the check for the amount of repairs for these damages will usually be made out to you and the mortgage bank. As a condition of guaranteeing you a mortgage, the lender usually requires that you be named as the beneficiary in case of claims in the homeowner's insurance policy and therefore they are part beneficiaries of the indemnities issued by the insurance for what it has to do with the structure of the house.

The lender is entitled to the same amount of compensation as the owner to ensure that necessary repairs are made and the value of the affected property is recovered. This forces the mortgage company or bank to endorse the check in the name of the owner so that the owner can carry out the repairs and make the payments. Generally, lenders place the compensation in an escrow account and payments are made gradually according to how the repairs are made. You must contact the mortgage company and show the contractor's budget so that the bank provides the funds required to start the work. The lender may decide to inspect the progress of the repair work or the final result before disbursing the rest of the funds.

Some contractors may require you to sign a document known as a “Payment Directive” or direction to pay that allows the insurance company to pay the contractor directly. Make sure that you are completely satisfied with the results and the work, before agreeing to sign any documents to the contractor. Remember that in this case you will not receive the check for the repair work. The construction company will send the bills directly to the insurer and attach the payment directive that you signed.

Regulatory bodies for banks and finance companies have guidelines that must be followed in the event of major disasters. If you have any questions or concerns about this, contact your state department of finance and banking.

Damage to your personal belongings

Among the expenses typically included in this line are bills for eating in restaurants (if they are staying in a hotel they cannot cook and need to eat out), rent for a place to stay with the family, such as a hotel or an apartment, as well as as additional transportation expenses for changing residence. Insurance generally refers to this coverage as additional expenses for the “loss of use” of your insured home.

The reimbursement check for this money should not be made out to your mortgage lender since this coverage has nothing to do with the funds to be used for home repairs and if the check is made out to the lender you will find it difficult to collect it.

If your home was destroyed

If your home was completely destroyed, you have several options:

• You can rebuild your home on the same land. The amount of money you will have to rebuild your home will depend on the type of insurance policy you have purchased and the specific amount stated on the first page (the statement) of your insurance policy. Generally, you will be entitled to the cost of replacing your current home, provided you use that money to rebuild the home. Remember that your policy will pay to rebuild your home to its pre-disaster features and condition. You won't pay to build a bigger or more luxurious home. The same rule also applies to repairs.
• You can decide not to rebuild or build in a new location. Depending on the state you live in, you may be able to sell the land and build or buy an existing home in a different location, even another state. If you decide not to rebuild, the amount of compensation will depend on several factors, including state laws, court decisions and the type of policy you have. To find out what type of indemnity agreement you could receive in this case, contact your insurance agent or speak directly to the insurer.