When Robert Gale and his wife returned from vacation, they found their kitchen flooded. It turned out a mouse had chewed through the small plastic hose that ran from the sink to the fridge’s ice maker and water dispenser.
Gale received an estimate from the insurance adjuster, which would only replace the areas that suffered water damage. The payout? Roughly $7,000. For Gale to hire a contractor to repair the damaged areas, plus restore his kitchen to full functionality, it would cost $20,000.
“Although I’m no contractor, I’m fairly handy,” says Gale, who is 31 and the founder of Real Money Robert. “I opted to do it DIY so that I could replace everything, including the stuff that was not water damaged, and come out with a brand new kitchen in the end.” All in all, the repairs, from the dryout process to remodeling, took six months to complete.
By going the DIY route, Gale figured he would be able to make the money he received from his insurer stretch much farther.
Filing an insurance claim for DIY work isn’t always straightforward. But if your home suffered damage and is in need of repairs, and you’d prefer to handle the repairs yourself, here’s what you need to know:
How the claims process works
To file a homeowners insurance claim, you contact your insurer as soon as possible to let them know about the damage to your home.
If the property damage is something the insurer will cover, you’ll be tasked with filling out the required claim forms. These forms need to be completed and returned within a given time frame.
The insurer will send a claims adjuster to your home, who will interview you and inspect your home. After the adjuster looks for property damage and at any personal belongings that need to be replaced, they’ll provide an estimate. You’ll receive an initial check to make the repairs.
You then get quotes from contractors, and hire one to do the work. After the repairs are done, you send what’s called a “Certificate of Completion.” The insurance company then pays out the remainder of the approved funds.
If you’d like to file a claim with your homeowners insurance company, they won’t cover everything. They’ll only cover damages caused by accidents and perils that are included in your policy. And with certain limits, too.
But can you file the claim without calling a contractor?
Weigh the pros and cons of going the DIY route
As in Gale’s case, by doing the work yourself, you can get more bang for your buck.
“I knew I’d be able to stretch the money I was going to receive from the insurance company a lot further if I chose to DIY the kitchen repairs instead of hiring a contractor,” says Gale.
And chances are, you’ll be able to keep any money that’s left over. But we’ll get to that in just a bit.
Even though everything went smoothly for Gale, that might not be the case for you.
If things go awry, your insurer might not cover the costs of additional repairs and related expenses. And while a contractor can most likely get the job done in a short time frame, if you’re juggling a day job amid home repairs, it might take longer for the repairs to be completed.
You’ll also need to know your comfort level and skills with such repairs and improvement projects. If you have little-to-no experience, you run a greater risk of botching up a job — which could prove to be more costly.
You should even consider if it’s safe for you to repair your own home. Depending on the kind of repairs your house needs, it could be very dangerous. And you might not even be aware of all the hazards once you’ve set out to take on this project yourself.
Take the time to seriously consider whether or not it’s worth it for you to do the work yourself. You don’t want to put yourself or anyone else in danger just to save some money.
Plus, there are a set of factors to mull over before you decide to fix the damage on your own.
Can you keep leftover money?
Let’s say you’ve done a bang-up, efficient job and have money remaining from your payout. There’s a chance you can keep the money for your personal use.
Of course, you don’t want to hide this fact from your insurer. If in doubt, run it by your insurance company first. And check your insurance policy to see if there are any specific rules on how money leftover from a claim should be handled.
Homeowners insurance claim: Doing the work yourself
So you’ve carefully weighed the advantages and downsides of doing the work yourself, and would like to opt for the DIY route.
First, you should inform your insurance company that you’d like to make the repairs yourself, and ask if there are any issues with doing so.
Withholding information from your insurer is a big no-no. This could lead to dire consequences, such as losing your insurance.
Here are a few other things you’ll need to check before rolling up your sleeves and digging in:
1. Get detailed estimates
Before you start your repairs, get thorough estimates on everything. Get estimates for tools you’ll need to buy, equipment you need to rent, and materials and supplies.
If you and your family will need to eat out or temporarily relocate while repairs are being made, factor that in, too.
Remember: You don’t have to do everything yourself. You might want to hire contractors for work that’s not in your skillset. Or for menial tasks you’d prefer someone else handle.
2. Understand the role your lender plays
If you have a mortgage, your lender might have a say in who does the repairs. There’s a possibility that they won’t let you do the repairs yourself.
You have a responsibility to make repairs that restore the home to its value. As your home is your collateral, lenders have a financial interest in your home.
If you’re trying to save money, you can’t cut any corners when making repairs.
3. Look into required permits or licenses
Some basic repairs, such as replacing the carpet, you should be able to DIY.
But more extensive, complicated repairs, such as jobs that require electrical wiring, might require special permits with the city or specialized training.
It’s important you double check with your city to see what’s needed before you start any projects.
4. Know the payout schedule
You need to find out how much l you receive for your first check, and how much to expect in subsequent payments. Next, figure out how much you’ll need to pony up front — if any — before you get money from your insurer.
If you need to pay for materials and equipment, or take time off, can you afford to do so until you receive the rest of your payout?
Insurers usually issue separate payments based on different types of damage, such as structural damage, personal belongings, and additional living expenses (ALE).
If your mortgage lender is named in the insurance policy — which is typical — under some circumstances the payout might need to be kept in an escrow account. You’ll pull money from the account when repairs are completed.
If you need items replaced, insurers typically offer payment for the Actual Cash Value (ACV), which is the current value of an item It also factors in depreciation. If your policy includes Replacement Cash Value (RCV), which is the cost of replacing an item, you’ll receive payout for that later.
5. Consider builder’s risk insurance
This is a type of property insurance that specifically covers your home during construction. It includes renovation and repair, and covers additional risks. This could be for things like if equipment is stolen while you’re making repairs, or if construction materials suffer damage.
While it’s something that contractors typically purchase, property owners can also buy it, too.
If you don’t have builder’s risk insurance, then you’ll be on the hook for any snafus during the repairs. If you plan on doing a fair amount of DIY home projects and renovations, it’s worth looking into.
Tips on negotiating
You don’t have to accept the first offer for payout from your insurer. There’s always some wiggle room for negotiating. Here are some ways you might be able to get a bit more than what the insurer initially offers:
1. Keep your insurance company in the loop
You don’t want to pull the wool over the insurer’s eyes.
“Be open and honest with the insurance company and give them as much information as possible,” recommends Gale. “Contact them as early as possible in the process so that they can guide you on the proper steps to take,” says Gale. “That way you can get your claim processed quickly and begin repairs ASAP.”
Let them know you’re considering handling the repairs yourself. If you are honest from the get-go, they’ll be more willing to accommodate your requests.
2. Get estimates from contractors
Before committing to doing the work yourself, get several estimates from contractors. That’ll help you gauge whether the payoff outweighs the trouble and costs. These estimates could also be used as leverage when trying to negotiate for a higher payout.
3. Document everything
Take photos of the damage, of structures that need to be repaired, and of items that require replacement. You’ll also want to take detailed notes of adjuster visits.
If the adjuster missed needed work, or overlooked costs, such as temporary repairs to prevent further damage, you’ll have the documentation to back you up, compare assessments against one another, and argue your case.
4. Ask for multiple adjuster visits
If you and the adjuster don’t see eye-to-eye on the cost of repairs or what repairs need to get done exactly, don’t be afraid to request a second, or even third visit. You want to make sure all damage is accounted for.
Handle disagreements as soon as they arise. If there’s something you’d like to dispute, reach out to your insurer and hash things out promptly. This will also help you know exactly how much to expect from your claim. In turn, you can plan out the repairs.
If you’re allowed to do the work yourself on a claim, remember to seriously consider every aspect of the DIY route before you make a decision.
Saving a little bit of money isn’t worth it if you put yourself in danger. Even if you are handy, you might not have all the knowledge needed to complete some of the more difficult parts of the repair. And you could end up spending more time and money than if you went with a contractor. It’s a decision that’s not to be taken lightly.