Experiencing serious damage to your home from a natural disaster is frustrating on several levels. The aftermath of a disaster can be disruptive to your life as you need to focus on repairing the damage before it gets worse and salvaging as much of your property as possible. You also must determine how to cover the cost of restoring your home.
In many cases, homeowners may file a claim with their insurance to help cover the damage, but there may be times when it is more advantageous to pay for the restoration out of pocket. Before deciding between filing an insurance claim and paying out of pocket, you must take several factors into consideration including the terms of your insurance policy, deductible costs, the extent of the damage, and the long-term impact to your finances. In this guide, we will discuss the pros and cons of filing an insurance claim and paying out of pocket to cover home restoration.
Differences Between Filing an Insurance Claim and Paying Out of Pocket
Choosing how to cover the cost of home restoration and repairs is an important decision as it can affect your financial situation as well as the results of the restoration.
Homeowners who pay out of pocket have more control over the restoration process
Out of Pocket
Paying out of pocket is when the homeowner decides to cover the cost of home restoration and repairs without going through insurance. This is usually the better option when there is minor damage and the cost is below the deductible threshold, or if the damage is not covered under your insurance policy. Homeowners who pay out of pocket have more control over the restoration process and can avoid increased insurance premiums that may result from making a claim.
Insurance Claim
When homeowners file an insurance claim, the insurance provider is notified and documents the full extent of the damage. Insurance adjusters then evaluate the validity of the claim and determine how the policy can cover the damage. If the claim is accepted, insurance companies will provide financial assistance to cover damage when the cost is beyond the deductible. However, there is also the possibility of having your claim denied or not covered and experiencing an increase in your insurance premium.
Choosing Between Filing a Claim and Paying Out of Pocket
When deciding the best course of action, you should take the following factors into consideration:
- Extent of the damage
- Urgency of the repairs
- Amount of the deductible
- Limits in coverage
- Policy exclusions
- Impact to your insurance premiums
- Financial situation
- Effect on future insurability
It is important to consider all the factors listed above and have a thorough understanding of the terms of your insurance policy. By taking all these factors into account, you can make an informed decision on how to proceed.
Choosing to Pay Out of Pocket
There are cases in which choosing to pay out of pocket for home restoration and repairs is the best option, but it is important to understand what paying out of pocket entails. Paying out of pocket puts the homeowner in control of the restoration process by eliminating the insurance provider as the intermediary. This can lead to faster turnaround times on the restoration project and avoid the headaches that come with managing insurance claims and dealing with adjusters. However, bearing the entire financial burden can be difficult for homeowners.
The following are the pros and cons of paying out of pocket that you must consider:
Pros of Paying Out of Pocket
Homeowners who choose to pay out of pocket for home restoration and repairs can experience the following benefits:
- Control of the restoration: Homeowners have more direct control of the restoration process and can choose a contractor without input or limitations from their insurance provider. Homeowners can also work with the contractor directly to determine the scope and timeline for the project.
- Faster turnaround: When paying out of pocket, homeowners can immediately look for a contractor to address the damage without waiting for the insurance company to approve or process the claim. This helps limit the extent of the damage and provide a faster turnaround time.
- Avoid premium increases: Filing an insurance claim can sometimes increase premiums. Avoiding going through insurance by paying out of pocket will prevent premium increases.
- Transparent pricing: Homeowners get more clarity and transparency in pricing by eliminating complicated insurance paperwork and deductibles.
Cons of Paying Out of Pocket
Before choosing to pay out of pocket for home restoration, you should consider these possible disadvantages:
- Financial burden: When paying out of pocket, the full financial burden falls on the homeowner. Depending on the extent of the damage, the restoration can be expensive which can put financial strain on homeowners and their families.
- Lack of benefits: Insurance companies often provide benefits such as covering living expenses while the home is being restored. Homeowners may miss out on these benefits by paying out of pocket.
Insurance companies can provide financial assistance to help pay for home repairs
Choosing to File an Insurance Claim
It is common for homeowners to file an insurance claim when they experience property damage to help cover the cost of the restoration. Filing an insurance claim has its advantages as it can relieve the financial burden on the homeowner but there may be limitations on what the insurance will cover, or your claim can be denied completely.
Make sure you consider the following pros and cons before filing an insurance claim for property damage:
Pros of Insurance Claims
- Financial assistance: Insurance companies can provide financial assistance to help pay for home repairs and restoration which is especially helpful for expensive repairs.
- Peace of mind: You can have peace of mind knowing that your insurance provider is managing the restoration process and will handle unexpected damage and other issues.
- Fast repairs: Insurance providers can help you return to normal faster by expediting the restoration process.
- Comprehensive coverage: Insurance policies can cause complete coverage for damages caused by natural disasters and other events.
- Professional guidance: Insurance professionals can help homeowners navigate the paperwork and procedures involved.
- Liability protection: Homeowners who have liability coverage in their policy are protected from legal claims and expenses from accidents that occur on their property.
Cons of Insurance Claims
- Deductibles and co-payments: Homeowners must pay the deductible as well as co-payments before the coverage starts.
- Premium increases: The premiums may increase after filing an insurance claim which can make your policy more expensive.
- Claim denials: It is possible for insurance providers to deny claims for a number of reasons which forces the homeowner to pay out of pocket.
- Claim delays: There are several factors that can delay the claims process such as investigations, paperwork, and disputes with the insurance company.
- Coverage gaps: Limitations in insurance policies may prevent full coverage of all the damage and leave homeowners with unexpected expenses.
When to Pay Out of Pocket
Paying out of pocket is the best option for situations in which the total cost of restoration and repairs falls below the deductible. You can also choose to pay out of pocket if you need a faster resolution as this can avoid some of the delays caused by the claims process. Resolving the issue faster helps prevent additional damage and accelerate the return to normalcy. Bypassing insurance for minor damage also preserves coverage in case you experience more severe property damage.
When to File an Insurance Claim
It is best to file an insurance claim if the cost to repair the damage has far exceeded your deductible. Insurance policies generally cover damage caused by natural disasters like fires, severe weather, and water damage as well as vandalism and theft. If your property is unsafe following a disaster, it helps to have liability coverage in case someone is injured during the restoration process. If the financial benefits of filing a claim outweigh drawbacks such as an increase in premiums, then you should consider filing a claim to cover the damage.
Disaster Restoration from ServiceMaster S&R Systems
When you are faced with property damage from a natural disaster, it is important to consider the pros and cons of filing an insurance claim or paying out of pocket before making a decision. Extensive damage that may be costly to fix is typically best covered by insurance while minor damage that does not exceed your insurance deductible may be best handled by paying out of pocket. By carefully considering factors such as the extent of the damage, cost of repairs, and what your insurance policy will and will not cover, you can make an informed decision on how to pay for the restoration.
Whether you file an insurance claim or decide to pay out of pocket, it is crucial to work with a disaster restoration provider you can trust. ServiceMaster S&R Systems provides comprehensive disaster restoration services to help homes and businesses recover from disasters including water damage, fires, and severe weather. Our technicians use advanced restoration methods and equipment to address the damage to your property, no matter the extent. We are ready to help homeowners who are paying out of pocket for restoration services, and we also work with insurance providers to help with claims.
You can call ServiceMaster S&R Systems at (630) 896-0030 for more about our disaster restoration services available throughout the Chicago, IL area.
