Let me start out by saying that dealing with home insurance claims can feel super confusing and frustrating. Believe me, I’ve been there! When your house gets damaged in a storm or some other random event, you just want to get things fixed quickly and move on with your life.
But then here comes the whole back-and-forth with insurance adjusters, various contractors knocking on your door, and the lingo about “actual cash value” policies versus “replacement cost value” policies. It’s enough to make your head spin!
Among all the questions that come up is the common, yet critical one: Do I pay my deductible to my contractor directly?
I’m going to walk you through the ins and outs of homeowners insurance deductibles, claims, and working with contractors so you can handle this process like a pro. Get ready to become a home insurance deductible expert!
What the Heck is a Homeowners Insurance Deductible?
First things first – let’s cover the basic definition of what a deductible actually is.
In simple terms, a homeowners insurance deductible is the amount of money you have to pay out-of-pocket before your insurance coverage kicks in.
So let’s say your wind/hail deductible is $2,000 and a storm damages your roof with $10,000 worth of repairs needed. You would pay the first $2,000 for the work on the house as your deductible, and then insurance would cover the remaining $8,000 in this example.
Deductibles come in a few different forms:
- Wind/hail deductible – applies specifically to wind and hail storm damage claims
- Hurricane deductible – a separate deductible for hurricane damage
- All other peril deductible – covers non-storm related issues like fires, water leaks, etc.
The all other peril deductible is usually a flat deductible (set dollar amount like $500 or $1000) or a percentage deductible (like 2% of your dwelling coverage).
No matter what though, there is also a minimum deductible you’ll pay based on where you live and the type of damage. For hurricane claims in coastal areas, it could be around $2,000+ minimum these days.
Bottom line – take the time to understand exactly what your homeowners insurance policy says about deductibles. Knowing what kind of deductible you have and the minimum amounts saves headaches down the road if you need to file a claim.
You Absolutely Must Pay Your Deductible
Now on to the question you really want answered…
Do you actually have to pay your deductible when using your homeowners insurance coverage?
The short answer is yes, you are legally required to pay your deductible amount to the contractor. I know, I know – it stinks, especially when it’s thousands of dollars! But not paying your deductible can get you (and your contractor) into hot water.
See, some shady contractors will offer to simply “absorb” deductibles into project bids or say things like:
“Don’t worry about your $2,000 deductible, I’ll take care of that for you!”
As nice as that sounds, deductibles exist for a reason as part of your insurance policy agreement. By illegally dodging your deductible, the contractor usually inflates other parts of the estimate to make up their profit margin.
This is considered deductible fraud and can lead to lawsuits, fines, or even jail time if caught! It also drives up overall insurance rates over time, so we all lose.
I get that paying a big ‘ole deductible bill sucks, but getting involved in insurance fraud is way more of a headache (not to mention illegal!). A reputable contractor will patiently walk you through the proper claims process.
The Deductible Payment Timeline
Now let’s talk about the timeline for when deductible payments happen…
After a major home damage incident when you start the insurance claims process, your home insurance company will first assess the situation. If it’s clearly covered under your policy, they’ll likely give initial approval and get the claims process started.
- With an actual cash value policy, they may issue the first check for just the depreciated value of say, your damaged roof. This is never enough for full repairs or replacement, unfortunately.
- For a replacement cost value policy, some carriers issue an initial payment for the depreciated amount, with the remainder coming after repairs are complete.
Here’s where your contractor comes in. Once that first check arrives, that money should go straight to the contractor as a downpayment to start work.
The contractor will then be responsible for collecting your deductible amount at the correct time – usually out of the final insurance settlement check.
They take their final payment plus your deductible payment and that equals the full cost of completed work! See how it all comes together?
Having this clear timeline makes sure you as the homeowner don’t get stuck paying for repairs out-of-pocket when you have insurance. It also builds trust with your contractor when everyone understands the process up front.
Contractor Red Flags: Too Good to Be True Offers
Let’s shift gears and talk contractors for a few…
As a homeowner dealing with repairs, the contractors flocking to your neighborhood or even knocking on your door can feel overwhelming. They smell a potential job and want your business!
While most roofers and contractors are ethical, there are always a few bad apples looking to scam stressed homeowners. That’s why you have to watch for red flags.
I already touched on the big one earlier:
A contractor offering to magically “take care” of, waive, or absorb your deductible.
That’s illegal! A good contractor will patiently explain that deductibles are required and show you how paying them properly fits into the claims process. They want to build trust.
Some even sneakier contractors will straight up try to pocket your deductible payment (usually cash or check) instead of applying it towards repairs. Then they put the blame on you when the insurance company asks for proof you paid it. Not cool!
Worse yet, they also may commit wider insurance fraud by illegally inflating repair bills. Now your claim looks WAY more expensive than it should.
This drives up premiums over time and generally mucks things up. That’s why verifying contractor licenses and business practices is so important before hiring.
Don’t ever feel rushed or pressured by anyone offering to “help” you in this process. There are ethical contractors out there, it just takes some digging!
Why Contractors’ Estimates Are Higher
Here’s another home insurance mystery for you…
Have you ever gotten an estimate for repairs from the contractor that was much HIGHER than what your initial insurance adjuster estimated?
“What the heck?”, you might ask. “Shouldn’t those amounts match up?”
Not quite! Here’s why there is usually a gap between the insurance estimate and your contractor’s estimate:
- The insurance company appraisal mainly covers physical materials/replacement costs. But your roofer also needs to factor in significant LABOR expenses, permit fees, and ancillary repair costs.
- Bids also build in something called overhead costs – a contractor’s general operating expenses like equipment, licensing, insurance, financing, and more that keep them running.
- Last but not least, don’t forget profit margin! Your contractor quotes projects at a certain percentage above their costs so they can, ya know, feed their families and stay in business. Makes total sense.
However…some “by-the-book” insurance adjusters overlook a lot of these categories that roofers have to consider on real-life jobs. That’s why knowledgeable contractors bid higher than insurance quotes.
But what if you get a bid that seems REALLY low compared to other contractors – like way cheaper?
That likely means they are cutting serious corners or using low-quality materials to scrape by. I’d pass in that scenario! Getting the cheapest job often leads to issues down the road when stuff starts failing quickly.
How to Find Reputable Contractors
Whew, this home insurance deductible stuff gets pretty complex, doesn’t it? Let’s wrap up with some tips for finding quality, trustworthy contractors to handle your repairs and avoid deductible headaches.
Here is my handy checklist:
- Ask neighbors for referrals – Word-of-mouth recommendations from people you trust hold a lot of weight!
- Verify their contractor license – Check with your state licensing board that they are legitimate and in good standing.
- Look up reviews and ratings – Lots of review sites out there today. Seek out companies with long histories of good feedback.
- Call references – Any contractor should readily provide past customer references. Ask their previous clients detailed questions.
- Check for proper insurance paperwork – Things like liability insurance help guarantee they operate professionally.
- Go with gut feeling – At the end of the day, always choose someone you get good vibes from and can communicate well with!
Doing diligent research ends up saving SO much frustration and money in the long run.
And remember, a truly professional contractor will:
- Take time to explain your home insurance deductibles clearly
- Outline what’s covered by insurance versus out-of-pocket costs
- Guarantee they properly collect/handle deductibles per state laws
Blow the Whistle on Deductible Fraud
Let’s wrap things up with some quick steps on reporting shady deductible situations. I want to make sure no readers get taken advantage of!
If a contractor ever straight-up offers to illegally pay your deductible or give you kickbacks, here is exactly how to handle it:
- Contact your insurance provider IMMEDIATELY – Make them aware of exactly what the contractor offered to do. They’ll guide you from there.
- Report fraud to the authorities – In most states, you can contact your Attorney General’s consumer hotline to file deductible fraud complaints if needed.
- Avoid slander – While posting negative reviews is OK if true, make sure what you claim publicly is 100% factual. Defamation lawsuits are no fun!
- Warn neighbors – Lastly, discretely giving neighbors a heads up about dishonest contractors keeps your community safer.
Whew – we just covered a ton of ground! Let’s recap the key stuff about paying deductibles directly to contractors:
- You must legally pay any homeowners insurance deductibles you owe
- Some shady contractors offer to “take care” of deductibles illegally to secure jobs
- Find ethical contractors willing to guide you properly through the claims process
- Verify license status, check reviews, and trust your gut on who to hire!
I know the home insurance claims process can be daunting, especially when big deductibles are involved. But having the right information in your back pocket makes all the difference.
Now that you know the score on paying deductibles, you can handle your contractor situations confidently from here on out!