Every homeowner will likely file a claim with their homeowners insurance at some point. You’ll probably want the process to be over as quickly as possible. After all, the faster you get your claim check, the quicker you can get back to normal.

So, how are homeowners insurance claims paid? Because guidelines can vary for each state and insurance company, it can depend on your insurance provider and your home’s location.

What Is a Homeowners Insurance Policy?

Before getting into how homeowners insurance claims are paid, it’s important to know what a homeowners insurance policy is: insurance coverage to protect a person’s home and belongings from unexpected events. 

The way these policies work is by providing protection if the policyholder loses property or suffers injury due to an accident or natural disaster. 

Policies also include liability coverage if you cause damage to another person’s property or someone is injured while in your home.

How the Claims Settlement Process Works

No two insurers are alike. The process of how homeowners insurance claims are paid can vary. It can also depend on state requirements—state law can specify different guidelines for claims payout periods.

However, the claims settlement process typically includes the same basic steps:

  • You file a claim.
  • The insurance company assigns an adjuster to your case.
  • The claims adjuster inspects the damaged items.
  • The adjuster reviews your policy to determine coverage.
  • If approved, you’ll receive a claim check to make repairs and cover expenses.

The adjuster will contact you to set up a time to assess the wreckage visually. Try to schedule this for as soon as possible.

While the adjuster reviews the details of your claim, they may complete a coverage review. A coverage review can help you understand what your policy covers, what it doesn’t, and how much coverage you have. 

The adjuster will determine if the damage is a covered loss under your policy. If it is, you can expect compensation for any damages or injuries to make repairs and cover expenses.

Questions to Ask Your Insurance Agent or Adjuster

Understanding the steps and process can help you prepare for the adjuster’s visits. However, some homeowners aren’t sure which questions to ask or where to start.

That’s okay! Here are some questions you may want to consider:

  • Does my homeowners insurance cover the damage?
  • Is there a time frame I should know about to file an insurance claim?
  • Will the claim exceed my deductible?
  • How long will it take to process my claim?
  • Do I need to get estimates for repairs?
  • What temporary repairs should I make, if any?
  • What’s the best way to save and submit my receipts?

Typically, the adjuster will guide you through each step of the process. That way, you’ll know what to expect.

How Damage Is Assessed During a Claim

About five percent of insured homes have a claim each year, according to the Insurance Information Institute. Assessing the damage is a crucial component of the claims process

It’s how the insurance company determines the extent of the destruction, whether your policy covers the cause of damage, and how much compensation you’ll receive.

The insurance company will rely on several factors to evaluate your claim. The most common are:

  • The square footage of the home or property that’s damaged
  • The type and value of the items damaged or destroyed
  • Whether repairs are enough or if it requires rebuilding or replacement

This is where it helps to have a home inventory. Having a list of items you own and their values can help prove your loss to the insurance company. Without it, you may not get enough of a settlement to cover your losses.

If you don’t have a home inventory, review photographs or videos. You may discover items that appear in the background of pictures to help you create a list of things you lost.

The adjuster can also use the images to estimate the cost of repair and replacement of your belongings

A licensed appraiser may also inspect the damage to help determine its value. However, if you have documents—receipts or appraisals—proving that you purchased expensive items, you can use them to estimate your loss.

For property or structural repairs, the insurance company may have a contractor come out and survey the damage. You can also request an estimate from your agent or company representative for the damaged items.

Who Gets the Claim Payment?

The insurance company can issue a settlement check after accepting your claim and reviewing the adjuster’s documentation. So, how are homeowners insurance claims paid? Your settlement can be issued by:

  • Check
  • Direct deposit
  • Electronic payment portal

But there’s a catch: The insurance company may not send the payment to you directly. Instead, they may send the settlement to your contractor or your mortgage lender to oversee the payout and make sure necessary repairs are made.

You Directly

Settlement amounts sent directly to you can be a check or electronic transfer, such as a direct deposit.

If your home is uninhabitable, you may have a temporary address. Give your insurer your updated address and contact information. 

Also, if you cannot live in the home, you may receive a check for additional living expenses (ALE), including rent, eating out, and extra transportation costs. Checks for ALE should be made directly to you.

Your Contractor

Your insurance provider may send payment to your contractor. The contractor or their management company may ask you to sign a direction to pay form to allow your insurance company to issue funds.

This form is a legal form. Read it carefully to make sure you fully understand what you’re signing.

Before the insurance company sends a final payment, check to ensure you’re satisfied with the work.

Your Mortgage Lender

If you have a mortgage on your home, your mortgage company may receive the settlement amount. 

That’s because your mortgage lender is likely a “named insured” on your home insurance policy. As a named insured, they can protect their financial interest by overseeing proper repairs if a claim is filed.

Every lender is different. There may be a specific process to follow or a set of documents to complete to get your mortgage company to release the insurance proceeds. For example, some mortgage holders will set up an escrow account to hold the funds until repairs are completed.

Contact your lender to ask about an “insurance claim check packet” to help make the process smoother.

What If There Are Multiple Claim Checks?

The process of how homeowners insurance claims are paid can vary. For instance, you may receive a single settlement check or multiple checks.

Single settlements to satisfy the entire claim are more common with smaller home insurance claims. Larger claims may have multiple settlements. 

For instance, your first check may be an advance settlement for additional living expenses if your home is uninhabitable. That amount is a separate payment from the rest of your claim.

You may also get two separate checks to pay for property damage or the replacement of personal property. This is because insurance companies generally issue separate funds for each category of damage.

Actual Cash Value vs. Replacement Cost Claims Payments

The total amount of insurance proceeds depends on how your insurance provider calculates the value of your home and belongings.

Part of the cost depends on how accurately you can describe and prove the lost value of your things. However, a significant factor is the type of policy you have:

  • Actual cash value
  • Replacement cost

The difference between actual cash value (ACV) and replacement cost is substantial. An ACV policy considers the cost of depreciation at the time of the loss. 

You can still get proceeds to cover what you lost, but you likely won’t get enough money to replace it outright and will need to use money out of your own pocket.

Replacement cost home insurance is typically far better than ACV because it doesn’t consider the depreciated value of your lost items. Instead, it provides the money to replace your belongings at current market prices.

The Role of Deductible in an Insurance Claim

Whenever you have a homeowners insurance claim, your deductible comes into play. This is the amount you pay out of pocket before an insurance company steps in to help with coverage.

It can be a specific dollar amount or a percentage of the policy coverage amount. For example, let’s say your policy states a $500 deductible, and your insured loss was worth $15,000. In this case, your insurance claim check would be $14,500.

Keep in mind that the deductible applies each time you make a claim. So, if you filed a claim in March and a separate claim in September, you’d pay your deductible in March and again in September.

Frequently Asked Questions

What happens if you have a property damage claim?

The first step is to file a claim with your insurance company. Then, your insurance provider will assign an insurance adjuster to visit your home. The adjuster will inspect what happened and evaluate the damage.

What is a coverage review?

To better understand the protection your policy provides, your insurance agent can review your coverage with you. You can discuss the coverage for your dwelling, personal belongings, and loss of use. Your agent can explain what is covered and what exclusions may apply.

How do I receive my claim settlement?

Insurance providers can issue claims settlements by check or an electronic transfer. Payments typically arrive within 48 hours, but the time can vary.

What if I have a mortgage?

Having a mortgage can change the claims payout process. Because your lender has a vested financial interest in your home getting repaired, they may be named on the claim check and manage the funds while the restoration is in progress.

What happens if my home is uninhabitable?

Homeowners insurance coverage often includes additional living expenses (ALE). So, if your home is uninhabitable, your claim payout will include a check for the additional living expenses, such as accommodations and meal costs, if you can't live in your home while it is being repaired.

Get Your Homeowners Insurance Claim Paid

Before receiving compensation for an insurance claim, you must contact your insurer. After that, the homeowners insurance company will send out an adjuster to investigate the situation. 

Cooperating with the insurance company and the claims adjuster can make the process smoother. Provide as much detail about the incident and resulting damage. And supply home inventories, receipts, appraisals, or other documentation to prove the value of your belongings.

Throughout the process, communicate with the adjuster, and document the payments you receive and expenses you pay. And if you don’t have a home inventory, now is an excellent time to make one. It can save you a lot of time and hassle if disaster strikes.

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Updated June 24, 2021

Amy is a content marketing writer who specializes in personal finance and technology. With a background in the legal field, she has a talent for transforming complex topics into content that’s easy to understand. When she’s not writing, she enjoys reading and playing board games with her family. You can learn more at amybeardsley.com.