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Today’s topic is a common question our firm get asked all the time: ‘Can you pocket insurance money? What if there’s excess money after repairs, do I get to keep it?’

What happens when you file an insurance claim?

After you report the damage, your insurance company will assess the situation and determine the payout based on the estimated cost of repairs. Now, here’s where it gets interesting – what if your actual repair costs are less than the insurance payout? Can you keep the leftover money?

Technically, yes, you can keep the excess money, but there are some important considerations to keep in mind. If you have a mortgage, your lender is likely listed as a co-payee on the insurance check. This means they have a vested interest in making sure the repairs are done correctly and completely. Mortgage companies may require proof that the repairs were made before they endorse the check. So, if you’re thinking of pocketing the extra cash without completing the repairs, think again.

It’s crucial to ensure all necessary repairs are made to prevent further damage or a similar loss in the future. Not only could this lead to more costly repairs down the line, but failing to properly address damages could also result in complications with future claims.

Here’s a pro tip: always get quotes from at least three reputable contractors before you start the work. This not only helps you get a fair price, but it also provides a solid basis for negotiating with your insurance company if their payout seems too low. But how do you choose the right contractor? Look for reviews, check their licensing and insurance, and ask for references. Make sure they have been in business many years and that they have experience with the type of repairs you need. This can save you from potential headaches down the road.

What about the situation where you do end up with excess money?

Should you tell your insurance company? There’s really no need to volunteer that information. As long as you’ve used the insurance money to make the necessary repairs, what’s left over is generally yours to keep. However, if your insurance company asks for receipts or an itemized list of repairs, make sure you provide accurate documentation.

Let’s talk a bit more about the implications of pocketing excess money. While it might seem tempting to use that extra cash for something else, remember that the primary purpose of the insurance payout is to restore your property to its pre-loss condition. Not doing so could impact your home’s value and payment for potential future claims. For instance, if the same issue arises again because it wasn’t properly fixed the first time, your insurer might deny the claim, citing that it was a pre-existing condition that wasn’t properly fixed the first time.

Accurate documentation is key. Keep all receipts, contracts, and any correspondence with your contractors. This not only helps you keep track of expenses but also serves as proof if your insurance company questions the repairs. It’s always better to have more documentation than you think you need.

What happens if you do have a dispute with your insurance company about the payout or the repairs?

This is where having legal support can be invaluable. At Premier Property Law, we specialize in insurance litigation and can help you navigate these disputes. Whether it’s negotiating with your insurer or representing you in court, we’re here to make sure you get the full benefits of your policy.

If you ever find yourself in a dispute with your insurance company, don’t hesitate to reach out to us at (954) 233-0120, or help@premproplaw.com .