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What to Do with Money Leftover from Home Insurance Claim?

Read Time: 8 mins

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Filing an insurance claim is never an ideal situation, but this is what the policy is intended for. You might have to file a claim because your home experiences damage, but what happens next? Once you get paid, the money you receive is yours to spend. Most people will pay for repairs or replacements immediately, but there are circumstances when there is money left over. You are allowed to keep this money to spend or save as you wish.

Key takeaways
  • You get to keep the money from an insurance claim in certain cases
  • Spending the money on repairs should be the priority
  • Any leftover money that you receive is yours to spend

The process of receiving an insurance settlement

After you file an insurance claim, you are going to experience a few necessary steps before receiving your settlement.

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Damage Assessment

Once the claim has been filed, an insurance adjuster will come to your home to inspect the damage. They will need to verify that what you reported is accurate and will determine the cause of the damage. This is important because it will determine which parts of your policy are going to cover these damages. After the inspection is done, the insurer will provide you with an estimate of the payout amount. You have the choice to either approve or deny it. If you decide the amount seems wrong, you can have a secondary inspection performed by a licensed contractor.

Agreeing to a Settlement

It is up to you which settlement you are going to agree upon. Once you see the one that seems like it is substantial and makes sense, you can move forward with the claims process. You will have to sign off on the settlement to confirm that you understand this is the amount that will be paid out. After you agree to this, you will not receive the money in one lump sum. It is normal to receive several payments because multiple parts of the policy could be covering the damages.

Receiving the Money

Since you are going to likely receive multiple checks, you can do what you want with the money you receive as it comes in. This is when you can schedule the repairs and replacements that are necessary for fixing your home. Since you agreed to a settlement, you will be aware of the total amount and can keep an eye on the checks you receive to make sure you are getting the full amount over time.

Who receives the money from an insurance claim?

Depending on the type of loss incurred, you could receive the money directly. There are other times when the mortgage lender will receive the payment and will then distribute it to you. Understanding the ways certain parts of the policy payout will help you determine if you need to wait for a check in the mail or a check from your lender.

  • If the loss has impacted your personal belongings or requires you to temporarily relocate until your home can be repaired, you will receive the insurance claim payment directly. This will come to you as a check in the mail, and you can begin using the money right away to take the necessary steps so you can continue living comfortably.
  • If your dwelling was damaged by a peril and your mortgage lender is listed as a loss payee, then they are going to receive the insurance claim money. You will still be able to use it, but they will receive it initially since they are listed as the entity that receives money being paid out due to losses. You can find out if your lender is a loss payee by reviewing your mortgage. 
  • In the event your mortgage lender receives the insurance claim money, they will be responsible for paying out the funds to the contractors who fix your home. You might be required to sign a “direction to pay” form by the contractor. This will allow the insurance company to pay them directly and will bypass the need for the mortgage lender to hold the funds. Before you sign anything, be sure to read the fine print to ensure you are not releasing the entire payment to the contractor.
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What to do with insurance claim money

You are naturally going to make any necessary repairs to your home right away. This is the first thing you will do with the insurance claim money. Once you have these repairs scheduled and all professionals have been paid for these services, you can assess how much money is left over.

This entire process is likely going to take some time to complete, so you might not know if there is any money left over right away. Make sure you are monitoring all of the expenses you incur during this time. This will help you stay organized while you are getting your home back in shape.

Once all necessary repairs have been completed, you can then determine the amount that you have left from your insurance claim. There are no rules regarding what you are able to do with this money that is left. You can spend it as you wish or put it into savings. This all depends on your personal preferences.

Frequently asked questions

Can you keep money from a homeowners insurance claim?

In most cases, yes, you get to keep the money yourself. The only instance where this might not be possible is in case your mortgage lender is listed as a loss payee. After the necessary repairs are completed, the lender might request that you make additional upgrades to make sure your home is not at risk of becoming a liability again. If the lender keeps the excess money after the contractor has finished making repairs to your home, you can inquire about what is going to happen to the remainder of this money. They will either release it to you directly or make a request that more alterations are made for the benefit of making your home safer.

Can I do my own insurance repairs?

If you feel you can take on the repairs on your own, you will have to check with your insurance company first. Some will allow you to do this, but the amount of money they payout will likely change. You can ask for these details to determine what the right decision is for you. Most people opt for hiring a professional contractor to get the job done. Before you decide to do the repairs on your own, even after you are given permission from the insurer, it is important to weigh out the pros and cons of this decision. You want to make sure your home is fixed in a timely manner, and taking on these repairs by yourself will often take longer than the process of hiring a professional to complete them.

Can I keep insurance money for my roof?

If your roof was damaged and you receive insurance claim money to fix it, you might be able to keep the remainder of this money to put towards replacing your roof. If the cost of the roof repairs was not more than the payout amount, you will have this extra money to work with. Again, this depends on the situation that you have in place with any existing mortgage lender and having direct access to paying the contractor. If you find that you have this leftover money at the end of the necessary repairs, you can absolutely spend it on your roof to better reinforce your dwelling. It often takes damage to realize that there are weak spots on your roof that could require upgrades, so using this available money this way is a wise decision.

How do homeowners insurance payouts work?

After the insurance adjuster inspects your home, you are going to receive an estimate of the payout. This should be a detailed settlement agreement where you can see all the damage listed and the estimated total it will cost to fix everything. As mentioned, you can always get a second opinion by having a licensed contractor come to inspect the property. If you feel there is anything off about the initial settlement offered, do not sign off on it until you feel confident in the amount you will receive. After a settlement is agreed upon, the money will either be paid out to you directly or to your mortgage lender. This is determined by what was damaged during the incident and if the lender is listed as a loss payee on your insurance policy. Any remaining money that is given to you directly or sent to you is yours to keep.

Going through the process of filing an insurance claim is methodical. The reason you have insurance is to protect your home from unexpected damages, and this is exactly what a claim payment is designed to assist you with. After all the repairs have been made and you have extra money from the settlement, this gives you the freedom to decide what you want to do with the remainder.

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