Paying a contractor from an insurance claim
Get a written contract that matches the insurer's approved scope, agree any upgrade in writing with its price before the work, and expect your mortgage company to be part of releasing the money. Most insurance job disputes start with one of those three missing.
A homeowner had no written contract on an insurance repair. The insurer paid $9,700, the homeowner had already paid $13,400 out of pocket, and now the contractor was demanding $3,000 to $10,000 more for upgrades the homeowner said were never approved, while claiming the homeowner was the one committing insurance fraud.
Why the check has two names on it
If you have a mortgage, the check for repairs to the house is generally made out to you and your lender, because the lender has a financial interest in the house being repaired (California Department of Insurance). The lender has to endorse it. On larger claims, many lenders hold the money and release it in parts as the repairs are inspected. Call your lender as soon as the claim is approved and ask how their process works, so the contractor's payment schedule can match it.
The scope and the extras
- Get the insurer's estimate and give it to your contractor. Their contract should match it line by line.
- Anything beyond the insurer's scope is an upgrade you pay for. Agree each one in writing, with its price, before the work.
- If the contractor finds damage the adjuster missed, they can ask the insurer for more (often called a supplement). Don't assume it will be approved; agree in writing who pays if it isn't.
- Your deductible is yours to pay. Be wary of anyone offering to "cover" or waive it; in some states that's illegal.
If it's already gone wrong
Collect what you have: the insurer's estimate, every payment, all messages about upgrades. Ask the contractor in writing for the approval for each extra charge. Your insurer and your state's department of insurance can help with claim questions; an attorney can help with the contract.
This is general information, not legal advice. States differ on what a home improvement contract and its changes must contain. Check with your state’s contractor licensing board or an attorney.