What Homeowners Need to Know About Contractors and Insurance Claims

After disaster strikes, whether it’s a storm, fire, or some other unforeseen event, one thing’s for certain—you want to get your home back to normal as soon as possible. But with emergency repairs comes home insurance claims, and when you’re working with a contractor, knowing how to handle insurance claims and invoices can be confusing. Here are the main things you need to know when dealing with a contractor invoice for an insurance claim.

Who Controls the Insurance Claim Payment?

The way in which your claim is paid—and who handles the payment—may vary. Typically, homeowners will receive multiple checks because property insurance claims can be complex and involve lengthy repairs. For example, your insurance company may send payments directly to your contractor (this would require you to sign a “direction to pay” form). Or, if you have a mortgage, your home insurance company might make checks for home repairs out to you and your lender. Mortgage lenders often want to be named in a homeowners insurance policy because it gives them access to any payments related to the house. The same practice applies if you live in a co-op or condo, except with the building’s management company. It comes down to this: Financial backers who are co-insured want to ensure that they will have to endorse the claims payment before you can cash it.

What If the Contractor Doesn’t Take My Insurance?

Unlike medical insurance, homeowners insurance policies do not operate within networks. It would be a rare occurrence for a contractor to not accept a payment from your insurance company for work done on your home. Essentially, this would mean they are denying payment for their work. To avoid potential payment issues, it’s best to establish a repair payment schedule with your contractor. This effort can help you and your contractor stay on the same page with the project from start to finish. Plus, it helps you look for any red flags, such as the contractor wanting a large down payment. 

Who Pays the Contractor?

Your insurance company may take you out of the payment equation by directly compensating your contractor. Rarely, if ever, will a homeowner handle a contractor invoice for an insurance claim. Another avenue is for the insurance company to send a check for both you and the contractor to sign off on.

Your contractor should provide different paperwork, ranging from a contract agreement to the license. But some contractors may request that you also sign a “direction to pay” form that allows the insurance company to pay them directly. Be aware: This is a legal document; read it carefully to make sure you are not signing over the entire claim to the contractor. Call your insurance company or insurance agent if you have questions or concerns about signing this form. 

Inspect Your Contractor’s Work Before Payment 

Don’t allow your insurance company to make a final payment until you have inspected the work to ensure that it meets your needs and specifications. It’s your home, so you deserve to be satisfied with the job once it’s completed. It depends on the type and scope of work that was completed, but here are some details to look out for when inspecting your contractor’s work:

• Toilets properly flush, and faucets easily turn on and off.

• There aren’t any dents or scratches along the walls or ceiling.

• Windows are able to open, close, and lock properly. 

• There aren’t any missing or damaged shingles on the roof.

• Cabinets and doors open and close without a struggle.

What to Know About Hiring a Contractor for an Insurance Claim

There are a few things you should know before hiring a local contractor to complete work associated with an insurance claim. Be wary of contractors who offer to handle your insurance claim. The insurance industry is heavily regulated, and laws vary from state to state. That said, a contractor may not have the expertise—or legality—to manage your insurance claim anyway. Here are some details and paperwork your contractor should provide:

• A written contractor estimate: This should include costs for labor and supplies and any other concerns related to your home’s repair.

• Schedule and time frame: You’ll want to ensure the contractor has adequate time to complete the project in a time frame that’s agreeable for you both.

• License number and insurance information: Reputable contractors will be able to provide both of these items. Working with an under-insured or unlicensed contractor can cost you in the long run through unfinished jobs and liability for injuries sustained while working on your home. Some contractors may also have a construction bond, which helps financially protect homeowners and other parties if something is damaged or the contractor does not meet the contract terms.

Are Receipts Needed for an Insurance Claim?

It is possible that receipts, or bills, might be needed for an insurance claim. When you file a claim, your insurance company might ask for a list of the lost or damaged items, and you may also be tasked with providing proof that you own the items on the list. This is where receipts for big-ticket items, such as electronics, furniture, and jewelry, could come in handy.

Often, being able to provide copies of receipts will speed up the claim process, getting you and your family back to normal faster. The faster the claim is processed, the faster you get money for your home’s repairs. Receipts also help provide sufficient “proof of loss.” Without it, your claim could be denied, depending on your insurance company and homeowners policy.