Q: I have a home with sink hole activity. My insurance company has offered me a cash settlement as soon as they received their engineer’s report.Their offer does not not cover their engineer’s estimate for ground settlement and their estimator’s cost for cosmetic repair.I am preparing a counter offer to cover these estimates. Also is it normal to have to surrender the policy?
First, it is standard to require a surrender of the policy with any settlement with any insurance company. You will need to find new coverage for the home once the settlement is complete and that is something you should consider. Second, you are facing an issue many homeowners are now with their carriers. Some carriers are taking the position that they will force you to fix your home and fix it the way they insist on. But, they will also advise you that if you do not plan on repairing, they are willing to offer you a cash settlement but, not for the full amount of the repair estimates, but maybe 50-75% of the estimated amounts. In essence, we will pay 100% if you repair it or 50% if you don’t. The key question is really what is your intent to repair. If you decide that it does not make financial sense for you to repair the home the way they want to (and I will never judge anyone for thinking that way because sometimes it just doesn’t make sense) you may want to consider the cash deal. Your mortgage will also play a big role in this. If you do not have a mortgage, the cash deal is more enticing as you don’t have to share that money with anybody and can do whatever you want with it. If you do have a mortgage you better remember that when they issue you the “cash deal” they will be putting your mortgage company on the check with you. If they offer you enough to pay the mortgage off, then you can do that and don’t have to repair necessarily. If they do not offer you enough to pay the mortgage off keep in mind that your mortgage company will force you to use that money to do repairs. Now you are in a worse position than before because you have to repair the house anyways and do it with less money and you have let the insurance company off the hook if any future problems occur.
The moral of the story is, if you have a mortgage and they are not offering you enough to at least pay the mortgage off, do not take the deal. You will be left in a worse position than if you just let the insurance company fix the house the way they want. At least if they fix it, they are responsible for any problems in the future and you don’t have to worry about cutting costs to get the work completed within a particular price range. Finally, make sure that you are satisfied with the repair plan they are offering before you start the work or accept a settlement. If you accept a settlement on a cheap repair plan you may have left money on the table. If you do the repairs with their cheap method you may not have your home properly repaired and can face even more issues in the future.