If I get bids lower than what my insurance company paid, can I keep the difference?

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This is a question that we often see with the insurance claim process. The truth isIt all comes down to how much you get paid.

You could keep the difference in rare cases. Here’s an example. Here’s an example. This is a very rare situation. It could be that the work performed was not what the insurance company expected or paid for.

In nearly all other cases, no. This is due to the way that the insurance company pays. One of these two ways is used to make payments.

ACV

An ACV (or actual Cash Value policy) is an insurance policy that pays the entire cost of replacement, less depreciation, and less your deductible. Here’s an example.

Replacement roof: $10,000

– $5,000 in depreciation

Minimum $1,000

$4,000 net payout

This scenario leaves you with less money than it actually costs to complete the work. You cannot keep any of the difference. This policy typically offers lower premiums. Hence, less payout.

RCV

You would receive the full replacement cost minus your deductible if you have an RCV or replacement value policy. Here’s an example.

Replacement roof: $10,000

Minimum $1,000

$9,000 net payout*

In this situation, most people begin to search for insurance companies or get quotes. They believe that if they get the job done for $8000, they will be able to pocket the difference between $9,000 net payouts and actual costs.

The net payout is made up of two payments: the initial payment and the recoverable amount (commonly called holdback). These are not paid until the job has been completed or invoiced. This is how $9,000 would be paid if the invoice or contractor was $10,000

Replacement roof: $10,000

Deductible: -$1,000

$9,000 net payout*

-$4,000 initial payment 1st check

-$5,000 depreciable ( holdback) 2nd check

It would not matter if the job was done for $8,000 as mentioned above. This is how the insurance company would calculate the final payment.

Replacement roof: $10,000

To actually replace the roof, you will need $8,000

Deductible: -$1,000

$7,000 net payout*

-$4,000 initial payment 1st check

-$3,000 balance ( Hold Back) Second Check

Recalculating the amount owed to the insurance saves $2,000 and makes your second payment $2,000 lower. They paid $8,000 for the actual claim, less your $1,000 deductible. They now pay $7,000, leaving you with no money to “keep.”

This post was written by Ted Williams! Ted is the owner of A Old Time Roofing which is the premier Largo Roofing Contractor! Ted is a Master Elite Weather Stopper GAF Roofing Contractor, a double award winner of Best Steep-Slope Contractor from GAF and achiever of Master Elite Consumer Protection Excellence from GAF. He has been serving the Pinellas County area since 1978.  Old Time Roofing has a tradition of quality workmanship, servicing residential and commercial properties.