Yes you can. However, you should be aware that there are some extra steps required, and you will want a contractor who is experienced in dealing with insurance companies. An insurance claim can be a great excuse to finally do that remodel project you’ve wanted to get done. A lot of the costs for the remodel like demolition, new drywall, painting and floor coverings might be fortuitously covered by your insurance settlement making that big project much more affordable.
When your home is damaged by a covered event, your insurance company owes you the money to repair your home to pre-loss condition. If you have a mortgage, your mortgage company will take steps to make sure their interest in the property is protected. The check you receive from your insurance company will have your mortgage company listed as a payee and they will hold the money in escrow until repairs are completed and inspected. Your insurance policy is a contract that requires your insurance company to pay you for damages, and your mortgage is a contract that requires you to make payments and maintain your property. Nowhere are you obliged to use your insurance money to make your home exactly the way it was before your loss.
Step 1 is to complete all required emergency services – this generally includes drying of wet materials, demolition of nonsalvageble building materials, removing contents from affected areas, cleaning of smoke or contaminated water residue, and any other service required to stabilize your home’s environment, prevent further damage, and identify 100% of the damage. These activities are covered under your policy and will not affect the payment you receive for repairs.
Step 2 is to have your insurance adjuster inspect the loss and write an estimate for repairs. It is a good idea to have your contractor present during the inspection since insurance adjusters usually do not have a construction background.
Step three – review the insurance company’s estimate for accuracy and completeness with your contractor. Things that are often inadvertently left out or undervalued by insurance adjusters are
- Code issues that most policies have coverage for – for example, you may need new wiring for the affected area of your home.
- Wall surfaces – plaster is worth much more than drywall, or if you have paneling over drywall you are owed for both
- High end items like expensive granite flooring, real or exotic wood trim, wool carpet, custom built cabinetry, special HVAC systems, etc
- Extra work needed to perform some repairs due to difficult access, lack of availability, or existing conditions in your home
- Some prices in the estimating software estimating software may not be sufficient for certain items. Get documentation for those items in the form of subcontractor bids, photos, costs, etc.
This step is very important. If you are simply repairing damage, and extra work is required it is easy to supplement your claim, but if you are making changes, the insurance company may deny your supplement because it would not have been needed if you weren’t making the change.
Step four – With your contractor make a list of the adjustments you need to your estimate. Call your insurance adjuster and explain your adjustments one at a time. An experienced contractor will be able to help you with this process. Your goal is to come to a settlement for your claim that includes the full scope of repairs your insurance company owes you.
Once you have agreed on your settlement, you can now proceed with work on your home. Your contractor will prepare an estimate for what you want done and you can use your insurance settlement to offset your remodeling expenses.