Why You Should Never Use Money from an Insurance Claim for a Separate Expense

The relationship between homeowner and insurer is one built on trust.

Life is expensive. Whenever money comes your way, it can be tempting to spend it on the first expense that comes to mind. When it comes to money from an insurance claim, however, you’d be wise to only spend that money on the repair it’s been allocated to.

A Cautionary Tale

Let’s say a severe storm hits your neighborhood and your roof sustains hail damage. You immediately file an insurance claim, and your insurance company sends you a check—addressed only to you—to cover the cost of repair or replacement. Now that you’ve had some time to do a little inspecting for yourself, you decide your roof doesn’t appear to be too seriously damaged and may not need to be repaired. After all, it isn’t leaking and the hail damage seems to only be cosmetic. Plus, getting a step closer to paying off your car mortgage or student loans sounds pretty enticing.

So, you spend the money on something else. A couple years pass, you decide to sell your home and your roof still seems to be performing just fine. You have a prospective buyer lined up to buy, so you have a contractor inspect the house. They find significant roof damage, and your home does not pass the inspection. Since you spent your insurance claim from a few years ago on another expense, you either have to file another claim or fund the repair yourself. If you try to file another claim, your insurance company may not grant you any money since they paid for significant roof repairs a few years before. If you try to fund the repair yourself, the sale may fall through before you’re able to find enough money.

A Little Trust Goes a Long Way

The insurance process can be arduous and confusing to homeowners, but developing a strong relationship with your insurance company guarantees that they will be more willing to guide you through the process. The relationship between insurer and homeowner is one built on trust. If that trust is broken by spending money from an insurance claim on a separate expense, insurance companies take actions to protect themselves, like raising premiums and excluding hail damage from plans. In the end, spending money from an insurance claim on a separate expense doesn’t work out in anyone’s favor.

It’s always best to have an accredited roofer or contractor inspect your roof after it has sustained storm damage of any kind. They will be able to identify damage that might not be obvious or visible and guide you in the right direction in regard to repair or replacement.

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