Making a Homeowners Insurance Claim if Doing the Work Yourself

Damage to your home can be costly, even if your homeowners insurance covers a portion of the cost. It may be tempting to file a claim and do the repairs yourself. However, while you may be able to do the work yourself, there is no guarantee that you will save much money.

Furthermore, if you are not licensed to perform the work, you may be liable for additional costs if the repairs do not go as planned.

Can you do your own home insurance repairs?

It is largely up to your insurance company whether you are permitted to do your own home insurance repairs, because the insurer determines how much it will pay to fix your home and when it will pay.

Most insurers will let you do the work yourself, but the amount of supervision they will provide will vary depending on the severity and complexity of the damage, as well as the insurer's policies. The insurer is also more likely to grant you permission if the work requires little skill, such as cleaning up debris, rather than requiring a high level of technicality, such as plumbing.

Legality

Another issue to consider is whether it is legal for you to perform the repairs at all. Depending on the severity of the damage and the laws in your area, you may be required to obtain a permit from your city or a license in order to make the necessary repairs.

• All electrical work in your city may be required to be done by a licensed electrician. If you can't or don't get these approvals, you might not be able to do the repairs yourself legally. Check with your local building department or development services to see what permits are required for your repair.

Your mortgage lender's permission

If you have a mortgage on your house, your lender may have a say in who performs repairs, and you may not be able to do the repairs yourself. One common clause in mortgage contracts requires your lender's name to appear on insurance claim checks.

If you have this clause in your mortgage, some or all of the money you receive from your insurance company will be written in both your name and the name of your bank.

Typically, the bank will hold the funds in escrow and pay the contractor directly once the repairs are completed. And, because the bank controls the money and has a vested interest in ensuring that your house is properly repaired, it may not allow you to do the work yourself. Check with your mortgage company to see if self-repairs are permitted.

Is it a good idea to do your own homeowners insurance repairs?

Consider the financial costs, local regulations, and, most importantly, the safety of the work before deciding to repair your own home.

Even if your insurance company gives you the green light to do the repairs on your house, you should carefully consider the risks and whether it's worth it to do the work yourself before committing to self-repair.

The first and most important consideration is safety. There are numerous potentially hazardous elements that can be involved in home repair. If the damage to your home is related to something like an electrical system and you're not familiar with dealing with it, don't waste this opportunity to learn — leave it to the professionals.

You should also consider whether the money you'll save is worth the time and effort, especially if you're not a seasoned DIYer. The amount your insurance company will pay you can vary greatly depending on the nature of the repairs, the size of the claim, and the policies of your insurer.

Though a permit or license may be required for major home repairs, homeowners generally have more leeway than professionals in terms of what they can do without one. However, if work is done without a permit or not to a professional standard, your insurance company is unlikely to cover additional repairs if something is fixed incorrectly.

• Assume your fence is damaged by a falling tree, and you repair it yourself. If a windstorm later damages the fence and the insurance company can show that the first repair was not done properly, the insurance company may refuse to cover the second round of damage.

Finally, if the damage is minor or cosmetic and you intend to repair it yourself, it may be best not to file a claim at all. Even if you can get some money from your insurance company right away, filing multiple claims in a short period of time can cause your rates to rise, costing you more money in the long run. It may be less expensive and easier to handle the work yourself rather than involving your home insurance company.

The process of making a homeowners insurance repair yourself

It's helpful to understand how the claims process works when you hire a contractor in order to understand the situations in which you can choose to repair your home yourself under a homeowners insurance claim. The exact procedure varies depending on the insurer, but the claims process typically goes something like this:

1. Inform your insurance company that your home has been damaged.
2. A claims adjuster arrives to assess the damage and provide an estimate.
3. You will be paid the actual cash value (ACV) of the damaged item. If you have RCV coverage, the ACV check serves as a down payment toward the total cost of the repair.
4. You obtain one or more estimates for the cost of labor and materials to repair the damage from contractors and submit them to your insurance company for approval.
5. Your home is repaired by the contractor you choose.
6. Either you or the contractor sends the insurer a certificate of completion (also known as a letter of completion). If you have RCV coverage, the remaining funds, also known as recoverable depreciation, will be released by the insurer. This money will be used to pay the contractor.

How doing the repairs yourself differs from hiring a contractor

Your insurance company will come to inspect the damage and calculate the value of the damaged property, regardless of who is doing the repairs.

Before committing to doing a repair yourself, get a detailed estimate from a professional after you've received an estimate from your insurer. Even if you're a seasoned DIYer, a professional may be able to detect or anticipate damage that you aren't aware of. Furthermore, they will provide an authoritative estimate of the cost of the work, giving you more bargaining power with your insurance company when settling your final payout.

Before you start working on your house, make sure you understand how your insurance company decides how much to pay you and when you'll get the money. The insurer may have a set payout for a specific type of damage or may calculate an hourly rate for your labor.

How a claim payout is calculated

Each insurer handles payouts differently, requiring detailed estimates for repairs in some cases — especially for large losses.

Your insurer may take a hands-off approach to paying a claim and not ask for much information about how the money was spent. Once you and your insurer have agreed on an estimated cost for a repair, it may only be necessary to provide proof of completion, such as a photograph or signed letter. Once it receives the proof, it will send you the funds to cover the full cost of the repair, regardless of who actually performed the repair.

In other cases, your insurance company may take a much stricter stance on the claim. This could entail requiring a detailed estimate — or multiple estimates — from licensed contractors, as well as detailed accounts of all costs, such as materials and tools required.

Your insurer may also manually calculate how much it will pay for labor based on established rates. If your insurance company goes this route, the dollar amount the insurer pays may end up being significantly lower if you do the work yourself versus having the work done by a professional — because the insurer will likely deduct administrative costs from its calculations for self-repair.

Keep in mind that the more expensive and complicated your claim, the more scrutiny your insurer is likely to demand. An experienced do-it-yourselfer may be able to recarpet a room or repair a wall without much difficulty, but an insurance company is more likely to want a professional to handle a costly or dangerous repair, such as repairing a roof or overhauling an electrical system.

Be honest and willing to compromise

In any case, it's best to tell your insurance adjuster right away that you intend to do the repairs yourself. Your adjuster will walk you through the process to ensure that you are compensated in the most straightforward and equitable manner possible. Keep in mind that intentionally withholding information from your insurance company is a crime.

It is not an all-or-nothing proposition to do the work yourself. The best solution may be for you to handle the menial tasks, such as debris removal, on your own while leaving the more specialized tasks, such as wiring, to a professional.

Your insurance company may also be more generous in compensating you for your work if you request that the money be applied to your deductible rather than cut you a check.

Can you keep any extra money from a homeowners insurance claim?

It's possible that you have leftover funds from your homeowners insurance claim, whether you saved money by doing the work yourself or your contractor came in under budget.

Typically, any money you end up with is yours as long as the company does not inquire about it and you did not lie or commit fraud to obtain it. Examine your homeowners insurance policy to see if there are any specific provisions governing what should happen with any leftover claim funds.

Maintain open lines of communication with your insurance company. It is considered insurance fraud if you intentionally pad the bills you or the contractor send to the insurer or if you lie and say there is no money left over. Insurance fraud is a serious crime, and if caught, you could face prosecution, a fine, or jail time. Furthermore, your policy will most likely be cancelled, and you may be barred from purchasing other insurance policies in the future.