What to do with 30K check from insurance Co.

Question

I have an interesting scenario.  My insurance co might write me up to a 30K check for damage to property from a recent storm. This would include costs to replace my roof, siding, and gutters.  My question is - is it typical for them to write me a check and then I can choose to do what I want with the money?

My dilemma is replace the exterior items (which I can't really raise rent for). In addition, the windows are probably 30yrs old so from my understanding I might as well replace those as well which is another 15K out of pocket.

OR

Do I use the $$ and replace the kitchens which are very out-dated, which I CAN raise rent for.

Gustavo Delgado · Answer

not 100% sure but I believe if you get a payout from your insurance to replace roof, for example and you do not replace the roof, you can expose yourself to serious issues. I think your insurance company will report that you received a payout and if you try to claim a damaged roof later you may be denied since you were supposed to already have had a new roof. Maybe take the cash, get some quotes and see if you can negotiate with contractors for the best deal possible.

Lauren Robins · Answer

Hi Steve,

In situations like yours, it is fairly common for an insurance company to issue a check directly to the policyholder, especially if there is no mortgage lender involved or if the claim is under a certain threshold. Once you receive the check, you technically have the freedom to use the funds as you see fit. However, the money is intended to restore the property to its pre-loss condition, and if you choose not to make the covered repairs—like replacing the storm-damaged roof, siding, and gutters—you could face issues with future claims or even risk non-renewal of your policy. From a strategic investment standpoint, if your roof and siding are still functional and the damage is mostly cosmetic, you may feel tempted to redirect the funds toward interior upgrades, such as the kitchen, which could yield a rent increase and better tenant quality. But keep in mind, deferred exterior maintenance could hurt curb appeal, future appraisals, and long-term preservation of the asset. Additionally, insurers sometimes do follow-up inspections or require proof of repairs for future claims. If you do decide to reallocate funds, it's wise to weigh not only the return on investment but also the long-term structural and insurance implications.Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Tom S. · Answer

@Steve Balinski  The main question is: do you have a mortgage currently? If so, that answers the question, the check will be issued to both of you, and most likely the lender will hold the funds in escrow to be disbursed when the intended work is complete.

If you don't have a mortgage, the check will come to you, but as others noted - if you don't complete the intended work, I'm sure the insurance company will drop you.

Andrew Syrios · Answer

No this is not unusual. In one instance, we just sold the property instead of doing the work. That being said, if you have a bank loan on the property though, you will need to keep them apprised and may have other conditions. I suspect they would want the roof be replaced. Our insurer pays us directly but I've heard of them escrowing the money with the bank. I will note we've had insurance payouts that end up being more than the cost of the repairs when all is said and done, so that is not unusual.

Alecia Loveless · Answer

@Steve Balinski My insurance company does inspections of my property every 3-4 years. Increasingly every time they do an inspection I am given a list of things that are required to be repaired.

If you don’t repair the items the $30K was for and upgrade the kitchens you my end up finding yourself with a laundry list of expensive repairs down the road when your insurance company catches up with you.

Steve Balinski · Answer

Interesting, thats kind of what I was getting the impression of.  If so, thats to bad, I really don't want to cough up 15K for the new windows :-( and this doesn't benefit my rental prices :-(.  Thanks for the info

What to do with 30K check from insurance Co.

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