How Do Home Insurance Companies Pay Out Claims?

Homeowners insurance helps pay to repair or rebuild your home after a covered loss, like a fire or natural disaster. When you file a claim, your insurer evaluates the damage and determines the estimated cost of repairs. The amount you receive depends on factors like the type of damage, the type of claim, and how your policy pays out.

It’s important to understand how insurance companies pay out claims if you have a home insurance policy. Here’s what you need to know about insurance claims settlements, including how long it takes to receive a payout.

What happens after you file a home insurance claim?

After a covered loss, you should file a claim with your home insurance company as soon as possible. Most home insurance policies cover claims related to dwelling damage, personal belongings, personal liability, and additional living expenses.1

In most cases, the insurance company will send an adjuster to your home to assess the damage in person and determine how much it’ll cost to fix. The insurer then uses that information to calculate an appropriate settlement based on the situation and your policy limits.2

Once your insurance company investigates and approves your claim, it’ll provide an initial settlement. You can use the first check to make initial repairs while you wait for the final payment to arrive. The amount of time it takes to receive the money depends on several factors, including your insurer and the nature of the claim.

How claim settlements work

After filing a homeowners insurance claim, you may receive the settlement in multiple installments.

You may receive different checks for each of the following coverage types during the settlement process:

How deductibles work in a claims settlement

Most home insurance policies have a deductible, which is the amount of money that you’re responsible for paying out of pocket when you file a dwelling or personal property insurance claim. When you receive the claim settlement, you’ll receive the full amount minus your deductible.3

It’s common for homeowners insurance policies to have a fixed deductible. For example, you might have a $1,000 deductible for dwelling insurance and a $450 deductible for personal belongings coverage.

But some policies have a percentage deductible based on the insured value of your home. For instance, if you insure your home for $300,000 and have a 2% deductible, you’d be responsible for the first $6,000 of damage. If you live in an area that experiences hurricanes or windstorms, you might have a percentage deductible for those losses specifically.4

Who gets the home insurance claim payments?

Home insurance claim payments don’t always go to the homeowner directly. While you might receive certain checks, others may go elsewhere, like to your mortgage company.

Learn more about who will receive the home insurance claim payment in different situations below.

Homeowner

As the homeowner, you receive any checks meant to replace personal belongings. You’re responsible for re-purchasing damaged items using the settlement from your insurer. You might also receive the money for structural repair work, but that’s not always the case.

You’ll also receive money for additional living expenses. You can spend this on temporary accommodations, such as a hotel stay and restaurant meals, during the repair or rebuild of your home.

Contractor

In the case of a dwelling insurance claim, your home insurance company might pay the contractor directly. Before the insurer gives your contractor the insurance money, you’ll need to sign a legal contract stating that the contractor will use the funds for the necessary repairs.

When your insurance company pays the contractor directly, it’ll manage the contractors and make payments until the project’s completion.

Mortgage lender or condo management company

If you have a home loan, your insurer will make out your claim checks to you and your mortgage lender. That’s because your lender has a financial interest in your property. If you own a condo or live in a co-op community, the insurer might also list your condo management company as an additional insured on your policy.

Typically, the lender or condo management company will need to endorse your claim settlement check before you can deposit the money and access the funds. While you might receive the check directly, you’ll need to work with your lender or the condo management company to get the necessary signatures.

How long it takes for home insurance companies to pay a claim

The period of time it takes to receive a claim check from your home insurance company depends on a variety of factors, like the category of damage. Your location is one of the biggest factors because some states impose a time limit for paying insurance claims.

Some states also have time limit guidelines for non-typical circumstances, like if the insurance company needs to extend the investigation. In these instances, the company will likely need to inform you of the extended deadline.

Here are the time limit requirements in all 50 states and Washington, D.C.

How to speed up the claims-settlement process

The home insurance claim process usually takes between a few weeks and a few months to settle, depending on your state. But you can try to expedite a claim settlement by taking these steps.

• File your claim as soon as possible. Don’t wait to file a home insurance claim. The sooner you file, the sooner your insurer processes and pays out your claim. Some states also have a time limit for filing home insurance claims before the statute of limitations ends.

• Submit appropriate documentation. To speed up the claims process, you should provide as much information as possible up front, like photographs of the damage, a police report, and relevant information about your home, like recent maintenance. That way, the insurance adjuster or claims representative can start investigating the claim right away.

• Know what your policy covers. Home insurance policies differ. Before you file a claim, make sure you understand what coverage you have. Your insurer won’t approve a claim for a non-covered incident, so you could end up waiting for money that’ll never come if you don’t understand your policy specifics.

• Make a home inventory. Having a home inventory of all your personal belongings can speed up the claims process for personal property claims. The inventory should include every item in your house and its estimated value. If you have receipts, include them in your inventory.

• Stay in touch with your insurance company. Communicate with your insurance agent or adjuster throughout the claim process. If you haven’t received a recent update, contact the claims adjuster and see if you can do anything to move the claim forward. Keep their phone numbers and email addresses handy, and find out the best ways to reach them.

Can you keep leftover money from an insurance claim?

In most cases, you can keep leftover money from a home insurance claim, but it depends on your state laws and insurance policy details. If your insurer pays a claim settlement to you directly and you find cheaper contractors or replacement materials, you could have leftover money.

If your insurance policy doesn’t stipulate that you return leftover settlement money, you should be able to keep it. But if your insurance company sends the settlement check directly to your mortgage company, you probably won’t be able to access the funds or get excess settlement money.

Home insurance claims FAQs