There are usually five basic steps to the claim settlement process. You file a claim, an adjuster is assigned, he/she assesses the damage, then he/she determines coverage, and the claim is paid. But how are homeowners insurance claims paid, exactly? Simply put, a homeowners insurance claim payment may be issued in the form of a check or direct deposit. It can take 24 hours up to 10 business days to arrive. Also, note that when both the structure of your home and your personal belongings are damaged, two separate checks may be received. If the home is uninhabitable, you'll receive a check for the additional living expenses. Flood insurance damage may mean a separate check as well. These payments will be made out to you, your contractor, or your lender if you are currently paying a mortgage on your home.
Cash value vs. replacement cost claims
To further answer “how are homeowners insurance claims paid,” compare policy options. Some plans will reimburse at your items’ actual cash value versus their replacement cost. When it comes time to receive your claim payout, this will make a big difference. If your property is insured for its cash value, the claim is paid based on the property’s depreciated value. If your coverage focuses on replacement costs, your insurance will offer the amount that the item costs today versus its current value. If you do have replacement cost coverage, your insurance company will likely require you to purchase the replacement item. Then, you will need to provide a copy of the receipt(s). So, your payout will probably come in two sums: one for the actual cash value of the item, then a second payment when you prove you replaced the item.
Who receives the claim pay out?
The claim settlement for repairs may be sent to you, your contractor, or your lender. The insurance company wants to see that the repairs are being done. If you have a mortgage, your lender has a vested interest in your home getting repaired. The check will be issued to you and the mortgage company for the structure of the house, but personal property checks are payable only to you.
The lender will sign the final check when the work has been completed, or they may pay for repairs by milestones. If your insurance is paying the contractor directly, he/she may ask you to sign a legal document to approve this. Read it carefully and make sure you’re satisfied with the final project before letting your insurer pay out. Note that the check for adjusted living expenses (ALE) should always be made directly to you.
The lender will sign the final check when the work has been completed, or they may pay for repairs by milestones. If your insurance is paying the contractor directly, he/she may ask you to sign a legal document to approve this. Read it carefully and make sure you’re satisfied with the final project before letting your insurer pay out. Note that the check for adjusted living expenses (ALE) should always be made directly to you.
How and when will the check come?
Regardless of how the payment is directed, the settlement will likely come in one of two ways: by check or electronic transfer. If your claim comes via check, you might receive multiple payments. Some insurance companies send an advance within 7-10 days as you sort out the total loss. You might also receive separate checks for each category of coverage. For instance, you could receive a separate check for furniture, repairs, and food replacement. As mentioned, a check made out to you for additional living expenses will also be sent separately if your home is uninhabitable. Do save any receipts for hotel stays, items you had to replace immediately, etc. If your provider reimburses through an electronic transfer, the settlement may come in as little as 2-5 business days. We recommend creating an inventory of your home to make the process go even faster.