YOU ASK:

What does your insurance company have to pay you for labor and materials if you choose to make repairs yourself instead of hiring a contractor because you work in the construction industry?

WE ANSWER:

The same amount as they would have paid if you hired another contractor.

Here's what will happen:

  • When you file a claim, the insurance company will send a claims adjuster to inspect the damaged area of your home. The adjuster will then provide an estimate of how much the claim will be, based on the cost of labor and construction materials.
  • The insurance company will make a payment and expect you to use this to in turn pay for the contractor who will repair your home.
  • After a specified time, the insurance company will again send an adjuster to verify that the repairs have been made and that the repairs were done properly.

Thus, what will happen is that you are just paying yourself for the work, instead of you paying the contractor, minus the deductible (and depreciation, if this applies to the policy).

It is important to show proof that the proper repairs have indeed been made. The insurance company is not the only one concerned about this. If you have a mortgage loan, your lender will also want to know that the repairs are done so that the property does not decrease in value. After all, they lent you the money to buy this house.

Another complication would be that if you have a mortgage, the insurance company will name the check to the mortgage company. You will also be the secondary person named in the check. In this case, the lender will be the one to decide on the contractor and you will have to negotiate with the mortgage company if they will allow you to do the repairs yourself.

You must take note that:

  • You need to present a contractor's license for you to be allowed to do the work.
  • The lender will not pay in full until the work is completely done.
  • Your work is subject to inspection by representatives from the insurance company and the lender.

As the licensed contractor who did the work on the house, you will be asked to show proof that the work is done and you as the contractor will sign a Waiver of Lien.

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