DIY Repairs and Home Insurance Claims
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Damage to your home can be very expensive, even if your homeowners insurance covers part of the repair cost. It may be enticing to make a claim and do the work yourself. Even if you're able to fix the damage yourself, there's no guarantee you'll save money by doing so.
Moreover, if you're not licensed to do the work, you may be responsible for additional costs if the repairs don't go well.
Can you do your own home repairs?
It's largely up to your insurance company whether you're allowed to do your own repairs, because they decide how much and when they'll pay to fix your home.
Most of the time, companies will let you do the work yourself. But the amount of supervision they'll want to provide will depend on the severity and complexity of the damage and the company's policies. They're more likely to grant permission if the work requires relatively little skill, such as cleaning up debris, rather than being highly technical like plumbing.
Legality
Another concern is whether it's legal for you to do the repairs. Depending on the seriousness of the damage and the laws where you live, you may need a permit from your city or a license to fix the house.
Your city may require all electrical work to be done by a licensed electrician. If you can't or don't get these approvals, you may not be legally allowed to do the repairs yourself. Check with your local department of buildings or development services to see what permissions you need.
Permission from your mortgage lender
If you have a mortgage, your lender may have a say in who performs a repair on your house and might not permit you to fix it yourself. A common clause in mortgage contracts states that your lender must be named on insurance claim checks.
If this clause is in your mortgage, some or all of the money you receive from your insurance company will have both your name and your bank's name on the check.
Usually, the bank will place the money in escrow and pay the contractor directly after the repairs are done. And since the bank controls the money and has an interest in making sure your house is repaired correctly, they may not allow DIY repairs. So check with your mortgage company.
Is it a good idea to make your own home repairs?
Before deciding to repair your home yourself, consider the financial costs, local regulations and, above all, safety of the work.
Even if your insurance company gives you the go-ahead to do the repairs, consider the risks and whether it's worth it to do the work yourself.
The first and most important issue is safety. Many dangerous elements can be involved in repairing a home. If the damage to your home relates to something you're not experienced with, like an electrical system, you should not use this as an opportunity to learn. Leave it to the professionals.
You should also think about whether the money you'll save is worth the time and effort, especially if you're not an accomplished DIYer. The amount your insurance company will pay you can vary greatly based on the nature of the repairs, the size of the claim and their policies.
Although a permit or license can be required for major home repairs, homeowners generally have more leeway than professionals about what they can do without a permit or license. But if work is done without a permit or fixed improperly, your insurance company probably won't cover further repairs.
For example, imagine that a tree falls on your fence, and you repair it yourself. If a windstorm later damages the fence and the insurance company has evidence that the first repair was not done correctly, they may not cover the second round of damage.
Finally, if the damage is relatively minor or cosmetic and you're considering repairing it yourself, it may be better not to file a claim at all. Even if you could get some money, multiple claims in a short period can make your rates jump, costing you more money in the long run. Taking care of the work yourself may be cheaper and simpler without involving your home insurance company.
The process of making a home repair yourself
To understand when you can repair your home yourself under a homeowners insurance claim, it's helpful to know how the claims process works when you employ a contractor. The claims process can vary by insurance company but usually goes something like this:
- You contact your insurance company and let them know there was damage to your home.
- A claims adjuster comes to survey the damage and creates an estimate.
- You receive a check for the actual cash value (ACV) of the damaged item. If you have replacement cost value (RCV) coverage, the ACV check acts as a down payment toward the total cost of the repair.
- You collect one or more estimates from contractors for the cost of labor and materials to repair the damage, which you submit to your insurance company for approval.
- The contractor you select repairs your home.
- Either you or the contractor sends a certificate of completion (aka letter of completion) to the insurance company. If you have RCV coverage, the company will release the rest of the funds, also called the recoverable depreciation. You'll use this money to pay the contractor.
How doing the repairs yourself differs from hiring a contractor
Regardless of who's doing the repairs, your insurance company will send someone to inspect the damage and determine the value of the damaged property.
Once you have an estimate from your insurance company, get a detailed estimate from a professional before committing to repairing it yourself. A professional may be able to spot or anticipate damage that may not be obvious to you, even if you're an experienced DIYer. They'll also come up with an authoritative estimate of the cost of the work. This gives you more negotiating power when settling your final payout.
Before you begin repair work on your home, understand exactly how your insurance company determines how much to pay you and when you'll receive the money. The company may have a standard payout for a specific type of damage or calculate an hourly rate for your labor.
How a claim payout is determined
Each insurance company administers payouts differently, sometimes requiring detailed repair estimates — especially for large losses.
Your company may take a very relaxed, hands-off attitude and not request much information on how the money is used. Once you've agreed on an estimated repair cost, the company may only require proof, such as a photograph or signed letter, that the work was done. Once that proof is received, they'll send you the money to cover the full cost of repair without looking into who did the work.
In other cases, your insurance company may take a much more rigorous approach. This could include requiring a detailed estimate — or multiple estimates — from licensed contractors and accounts of all the costs, such as materials and tools needed.
It's also possible your insurance company will manually calculate the amount for labor based on established rates. In this case, the amount they pay may be much lower if you do the work yourself, compared to having the work done by a professional. That's because administrative costs will likely be taken out of the calculations for self-repair.
Remember that usually, the more costly and complicated a claim, the more oversight. An avid DIYer may be able to recarpet a room or repair a wall without much trouble, but an insurance company is more likely to want a professional to make very expensive or dangerous repairs, such as fixing a roof or overhauling an electrical system.
Be honest and willing to compromise
In any case, it's best to be up front with your insurance adjuster about your plans to do the repair work yourself. They'll guide you through the process to ensure you're compensated as simply and fairly as possible. Keep in mind that it's a crime to deliberately withhold information from your insurance company.
Doing the work yourself is not an all-or-nothing situation. The optimal solution may be for you to take care of the menial work, such as debris removal, on your own and leave the more specialized tasks like wiring to a professional.
Your insurance company may also be more generous if you ask for payment to count toward your deductible rather than getting a check.
Can you keep extra homeowners insurance claim money?
You may have money left over from your homeowners insurance claim, because you did the work yourself or your contractor came in under budget.
Normally, any money you end up with is yours, as long as the company doesn't ask about it and you didn't lie or commit fraud to get it. Look over your homeowners insurance policy to see if there are any provisions specifying what should happen with leftover claim money.
Be honest with your insurance company. Whether you deliberately pad the bills or lie and say there's no money left over, it's insurance fraud, which is a serious crime. If you are caught, you may face prosecution and a fine or jail time. It's also likely your policy will be canceled, and you may get blacklisted from buying other insurance policies in the future.
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