It’s a question we see often with the insurance claims process and the truth is;
It all depends on how you are paid.
In rare cases, you could possibly keep the difference. Here’s an example. The insurance company paid you in full, less your deductible, and the amount you owe for the work performed was less than the insurance payment. This is extremely rare and may be because the work performed was less than what the insurance company paid for or anticipated to have done.
In almost all other cases, the answer is no. The reason is because the way the insurance company makes the payments. Payments are made in one of the two following ways.
ACV
If you have an ACV, or actual cash value policy, the insurance company pays you the full cost of replacement less depreciation and less your deductible. Here’s an example:
$10,000 assessment to replace the roof
– $5,000 in depreciation
– $1,000 deductible
$4,000 net payout
In this scenario, you are left with much less than the actual cost to get the work done. There is no money left over to keep any difference. This policy usually offers lower premiums. Hence, less payout.
RCV
If you have an RCV, or replacement cost value policy, you would be paid the full cost of replacement less your deductible. Here’s an example:
$10,000 assessment to replace the roof
– $1,000 deductible
$9,000 net payout*
Now in this scenario most folks begin the process of getting quotes or shopping for the insurance company. They assume if they now get the job done for $8000 they can pocket the difference between the $9,000 net payout and the $8,000 actual cost.
However, the net payout is made in the form of 2 payments; the initial payment and the recoverable depreciation amount (commonly referred to as hold back), which is not paid until the job is completed or invoiced for. So this is how the $9,000 would be paid (if the contractor or invoice was needed $10,000):
$10,000 assessment to replace the roof
-$1,000 deductible
$9,000 net payout*
-$4,000 initial payment 1st check
-$5,000 recoverable depreciation (hold back) 2nd check
If the job were done for $8,000 like mentioned above, it would not matter that the insurance assessment was $10,000. The insurance would recalculate the final payment owed like this:
$10,000 assessment to replace the roof
$8,000 to actually replace the roof
-$1,000 deductible
$7,000 net payout*
-$4,000 initial payment 1st check
-$3,000 balance (hold back) 2nd check
By recalculation the amount owed the insurance saves $2,000 by making your second payment $2,000 less. They still paid the actual claim of $8,000 less your deductible of $1,000. Their payment now total $7,000 leaving you no money to “keep.” If you have questions about deductibles and the insurance claims process, ask them below!