Woman talking to insurance adjuster © iStock

Dear Insurance Adviser,

Do I have to use all the money paid out from a home insurance claim to do repairs? I’m getting a large amount of money but can get the work done for less.

— Mia

Dear Mia,

Homeowners insurance policies pay the cost to repair or replace covered structural damage. If you can get the work done for less than the insurance company paid you, you need to talk to the adjuster and see how it should be handled. Chances are the adjuster will have you send paid receipts, and if the total ends up being less than the insurance company paid you, you’ll probably be expected to refund the difference.

Your problem is interesting because most of the time the amount paid is less than a contractor would charge. You’d be pretty upset if your insurance company paid $10,000 for repairs based on its estimate, and the least you could get the work done for was $14,000. Who would be responsible for the $4,000 difference? Obviously, you would want the insurance company to take care of that.

It works in a similar fashion when the estimate is for more than a contractor wants to charge. If the insurance company would be expected to pay more when its initial estimate was too low, then it’s only fair that the insurer get a refund if its estimate was too high.

Be careful with contractors offering lowball estimates. They might not be reputable. They may not be insured for liability or workers’ compensation. They may even miss some hidden damage that the insurance company provided for in its higher estimate.

My advice to you to avoid this type of problem in the future is to call and ask your adjuster to meet with your contractor at your home so they can do an estimate together that they both can agree on. Then, everybody’s happy — and you stay out of the middle.

Good luck.

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