I've not heard of an insurance company requiring the customer to pay for repairs out of pocket and then reimbursing them after the repairs are completed.

If it is the final check you are concerned about, can't that check be the one you will pocket from the savings of doing your own painting?

We just went thru this, we were able to have the bank sign off and then deposit the money to our account and then pay the contractors as needed. Although the work ended up being way more in scope than the insurance was reimbursing us for. And even with replacement coverage it was not nearly adequate for a historic home. God luck!

I don't work in the mortgage or insurance industries. My information below is based on my experiences as a homeowner.

If you are willing to serve as your own general contractor to manage the restoration and repairs (meaning, you're hiring the subs, organizing timelines for completion, etc.), then let your mortgage company know you're going to serve as your own general contractor. This is often a different process than if you were hiring a general contractor to complete the project. If the scope of your work is manageable for you to handle as the GC, then the paperwork for reimbursement from your mortgage company will likely be simplified.

The mortgage company will want to inspect the work before releasing funds to you, but they probably will not be involved in who completes it, and so on. (Therefore, if you fix that minor trim repair, or replace a damaged vanity yourself, or paint, based on what the claim requires, you just have to demonstrate it's been completed come inspection time.)

Your insurance company should have provided you with an outline of what repairs are covered, and at what cost. The mortgage company has a copy of this, too, and will probably use it as a guide to inspect the work to be sure it is completed, and then reimburse funds to you on a scheduled basis (for example, at 25% completion, at 50% completion, and so on).

Many mortgage and insurance companies are now requiring that major repairs on claims be handled in this manner--where the mortgage company holds the funds from the insurance company and requires proof that the repairs have indeed been made before the homeowner is reimbursed. It is what it is.

Again, if you can manage hiring out all the work that needs to be done, and your mortgage company has provisions for if you serve as your own general contractor, the paperwork will likely be simplified for you.

My best advice is to assess the work needed and whether you can serve as your own GC. Then, get on the phone with your claims adjustor, and then with your mortgage company, and be sure you understand all requirements and specifications in this process.

Editing to add that you may want to post your questions over in the Home Disasters forum, too. Good luck with your restoration.

This post was edited by peony4 on Fri, May 9, 14 at 12:34

Can you afford to pay off your mortgage at this time? If so, it sounds like that would simplify the whole process.

Years ago, when some banks weren't paying condo fees on foreclosed properties, they tightened the laws and required much more paperwork that the owners had to do. At that point I decided to pay off my mortgage to avoid the extra bureaucracy.

We're just finishing a gut job kitchen remodel with just this situation. As was mentioned above once the three parties sign off on the checks you can deposit them in your own account and pay your contractor out of that. What we did was deposit the checks directly into our contractors account after he laid out the money to buy the cabinets (first check), then the counters (second check) and we are holding the third check until our final checklist is completed.

Our contractor has been very open with us as to the various costs and we chose some places where we could reallocate funds from one thing to another or do certain work ourselves (painting, cleaning etc.) and save some money there.

All of the insurance money has gone into restoring the kitchen but we were able to add some extras and higher end things over what we would otherwise have been able to fit into the budget by doing some DIY stuff.

Good luck as you embark on this. Our contractor handled almost all of the insurance stuff for us, which was a relief as there were definitely issues. We went through three desk adjusters during the process, one of whom delayed the entire project for nearly a month. Fortunately after she vanished the new adjuster was great.

The mortgage company has been very easy to deal with. All they asked is that we sign a paper agreeing the money would be used to fix the kitchen (which of course it was!) and they were prompt about signing and returning the checks as they came in.

Oh, one more thing, don't forget to save your receipts for dining out or any other expenses incurred, you should be reimbursed for that as well!

I used to have an insurance license many years ago and was happy to leave the business.

Your mortgage lender is listed as an Additional Insured on your policy because they have an interest in the property being insured.

As for pocketing the money, my comment is this: insurance rates are filed and approved by the states departments of insurance. Insurance companies look at the ratio of rate money collected to claims money paid out. So more money paid in claims results in rate hikes to the insurance pool. For that reason, I am not a fan of pocketing money from an insurance claim.

Edited to add: obviously rates are determined on more than the money,but I was using that as an example.

This post was edited by 1929Spanish on Fri, May 9, 14 at 15:54

Agreed, 1929S. Yet many homeowners aren't familiar with what should properly be "counted" in a claim and often encounter hidden expenses during the restoration process that they overlooked when filing the claim, leaving money on the table. Unfortunately, it's a screw-or-be-screwed process.

Well, this has definitely been a learning experience for us!

We've not been happy with the level of responsiveness from our insurance company although it supposedly is ranked as one of the top companies in the country. In many ways they have screwed up from the get go. So, we've been feeling that we are definitely on our own on this one.

After more than a month of hassling this, we are starting to think that perhaps we should have just hired a GC. But, at the start we didn't realize that the scope of the necessary repairs would keep expanding into the realm where a GC might be necessary. Our adjuster just told us to find some companies to bid on the heating and plumbing work (all that we initially thought was involved). As we get further into this, we are realizing all of the additional things that will need to be worked on.

I guess we are lucky in that we have the funds in hand to pay for some of the initial expenses such as temporary lodging and initial diagnostic work on the house. A number of times we've talked about how in the world people who don't have the extra money would be able to handle making these payments and then waiting for reimbursement. Our insurance company didn't even step up and offer any assistance with finding temporary lodging until more than two weeks into this. And, then, they didn't have any better options than I'd managed to find after hours and hours of searching on my own.

I think some of the issues we are having are due to our wanting to do things our own way to make sure they are done correctly and in a manner suitable to a 100 year old house. The insurance company has four approved contractors in our city, and if we had chosen to work through them all of the money would have gone directly to them through the insurance agency without us having to be involved at all. But, we started looking into reviews of those companies, and they weren't great. So, we opted out of using those approved contractors. We are ending up acting as our own GC, but it is a lot of work! We are lucky we have the time to do this.

Yes, we have just considered paying off the rest of the mortgage and could do that. But, we live in a pretty pricey house and that is a good chunk of money that we might want to have available elsewhere in this entire process. So, we are sitting on that idea for a bit.

And, when asking about pocketing some of the money by doing work on my own, my intent is not to defraud or raise rates. I just want to know why I could not do the painting myself since I am as capable as the professional that I know the insurance company will be paying a pretty penny to do the same work.

So, are some of you suggesting that we just hire a GC, have the GC make a bid for the entire project, and then make our own arrangements with the GC on how we could save some of the total sum by doing the work ourselves?

Thanks for all of the advice and personal experiences.

"And, when asking about pocketing some of the money by doing work on my own, my intent is not to defraud or raise rates. I just want to know why I could not do the painting myself since I am as capable as the professional that I know the insurance company will be paying a pretty penny to do the same work."

You are not "pocketing the money" ... you are doing the work so why shouldn't you get paid for it? Whether it's you doing the work or a "professional" makes no difference.

I had a pipe burst in my kitchen when I first moved into my house and it destroyed the wood floor. The insurance company sent their "preferred" restoration company over to estimate the cost of repairs. The estimate was much more than it would cost to fix the floor and included some ridiculous charges. They tacked on charges to repaint my entire office which shares an adjoining wall with the kitchen. A small hole had to be cut into the drywall on the office side to repair the pipe, but repairing that certainly didn't warrant the entire room being repainted. When I questioned the estimator about it, he blew it off as standard operating procedure. Of course, this same company was hoping to get the work.

I called the insurance company and told them that their estimator was inflating the heck out of the "needed" repairs but they didn't care. They cut me a check for the entire amount, but we sure didn't hire their company to do the work, and we didn't paint the office ... just patched the hole and touched up the paint. We replaced the floor ourselves and kept the remainder.

needinfo1, if you have the time, the inclination, and the temperament for management, there is no reason you can't act as your own GC. I don't like hiring a GC for jobs that I can manage myself because I don't like giving up that control ... I want to use subs that I have hand-picked, I want to choose all my own materials, and I want to have things done my way. Just because you have a GC doesn't mean that your project is going to be free from hassles. A quick look around this forum will attest to that.

I went thru a similar problem a couple of years back after storm damage to a pole building. The roof repair was 20,000 and the insurer wanted to write the check to me plus mortgage underwriter. my situation was similar to yours in that my equity was very high.

I had to raise hell with the mortgage underwriter but after several phone calls where I simply refused to accept their policy that they had to be co-signers on the check I finally got to someone that admitted that my equity was more than what was required for them to be on the check. It was interesting to me that they had a reasonable policy (I suspect mandated by state law) but I had to push very hard to get them to comply with my wishes. I finally threatened to "pay off the damn loan and they could go to hell" which got me to someone that could approve the repair checks going to me only.

oldryder and jellytoast--

You've given me some new insights and things to think about over the weekend. That's what I like so much about these forums. I know others out there have to have gone through some similar experiences and have different ideas about handling them than I can come up with on my own.

I suspect that the practices that 1929spanish was referring to are the people that file a claim, as inflated as possible, with no intention of making the repair, and "pocket" that money. Common with auto accidents, Still, they have the right to do that, I think (well not inflating the claim -- that is fraud), they have paid for the insurance to cover damage and lost value, if they prefer to have the cash instead of restored value and are content to have a car that is now worth less.

When there is a mortgage holder, though, it seems that they wouldn't really have the right to do that since technically it isn't only their property; they have a legal obligation to protect the value of the property, don't they?

Jellytoast's point is absolutely correct, though, you are being reimbursed for making that repair; who makes the repair is not the issue.

I like oldryder's suggestion of asking the mortgage company what their procedure will be in your particular case. They may just sign the checks over to you without issue.

I think we will further investigate the idea of asking the mortgage firm if they waive that requirement in cases like this where they really have a very small percentage interest in the house. If that were the case, and we didn't have to deal with that issue, it would seem to me that we could get painting bids, have the insurance company issue us a check for the amount of a fair bid and then decide whether to hire the work out or do it ourselves. Thanks all.