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The Restoration Triangle: Homeowner, Contractor, and Insurance Company Roles & Responsibilities

A home disaster is bad enough. Navigating the ensuing repair process with your insurance company and a restoration contractor shouldn’t add further stress to your life. Whether you’re dealing with the aftermath of a flood, fire, or storm damage, understanding the complex dynamics of these relationships can help you on your journey to restore your home.

Our team at Lamont Bros. Design & Construction understands the challenge homeowners face when balancing these relationships. As a custom design-build firm in Portland, we’ve seen firsthand the challenge of coordinating home restoration projects between an insurance company and a contractor.

In this article, we’ll take a look into the heart of insurance restorations, shedding light on the roles and responsibilities the homeowner, the insurance company, and the contractor. After reading, you’ll be more confident in navigating the repair process. By the end of this article, you’ll have a clearer understanding of:

The Complex Triangle of Insurance Repairs

In the aftermath of a home disaster, the path to restoration involves a complex triangle of relationships between the homeowner, the insurance company, and the contractor. Each party has its own distinct goals and responsibilities, creating a dynamic that can often be difficult to navigate.

The Homeowner: The Epicenter of Decision-Making

The first person in the restoration triangle is you, the homeowner, whose life has been disrupted by unforeseen damages. Your ultimate goal is to restore your home to its former state, or better, and return to normal life.

As the homeowner, you are the decision-maker, the one who must balance your desire for a thorough restoration with the limited budget provided by your insurance settlement.

The homeowner has direct relationships with both the insurance company and the contractor. As a result, they must act as the central point of communication and decision-making. Ultimately, it is the responsibility of the homeowner to ensure that the insurance company receives receipts from the contractor and the contractor receives payments from the insurance company.

insurance restoration
Your goal as a homeowner is to restore your home as quickly as possible.

The Insurance Company: Balancing Costs with Coverage

The insurance company’s role in this triangle is often seen as adversarial, though it is more complex. Their responsibility in the case of a home restoration is to pay the costs incurred to restore the home to pre-loss condition.

Your insurance company’s goal is to cover the costs of repairs as stipulated in your policy. However, they also want to keep the cost as low as possible because their first priority is to protect the interest of the shareholders of the company. When settling a homeowners insurance claim, the insurance company will always try to tip the financial scales in their favor. It’s common for them to offer much less for an insurance claim than it will actually cost to repair.

Your insurance company may or may not have a direct relationship with the restoration contractor. They tend to have the most communication directly with the homeowner, but they certainly have a significant impact on the contractor’s work and the homeowner’s financial responsibilities.

The Contractor: The Experts on Restoration

Contractors enter this triangle with the dual aim of making a profit from the restoration and ensuring client satisfaction at the end of the project.

They are experts in home repair and restoration, often advising homeowners who are navigating the insurance claims process. A good contractor understands the intricacies of insurance policies and can advocate for the homeowner, ensuring that the repair scope is fully covered and fairly priced.

However, their relationship with insurance companies varies from contractor to contractor. While some contractors are well versed in billing and justifying costs to insurance companies, others lack the understanding or experience to be able to do so effectively. In turn, this can impact the billing and claims process.

Common Challenges in Home Restoration

To effectively complete an insurance repair project, you should understand some of the challenges you may face during the process. Below are some of the most common issues that arise for homeowners during a restoration.

3. Knowing Who to Trust

Homeowners are often find themselves caught between the conflicting interests of the contractor and the insurance company. This dynamic is challenging, as each party’s differing goals can lead to misunderstandings, delays, and additional costs. Knowing who to trust becomes crucial in navigating these waters effectively.

A contractor might suggest that your insurance company is trying to skirt costs by paying out less than what the repairs are worth. On the other hand, insurance adjusters might suggest that the contractor’s estimates are excessive or unnecessary.

Ultimately, it becomes your responsibility to choose who you want to listen to. If you lean towards trusting your insurance company over your contractor, you’re more likely to get faster payouts and fewer delays. However, if you lean towards trusting your contractor, you’re more likely to end up with more thorough repairs and a larger total settlement.

2. Exclusions in the Original Insurance Policy

Insurance policies may contain exclusions that homeowners are unaware of until they file a claim. For example, certain policies may not cover code upgrades or specific damages, leaving homeowners to cover these costs out-of-pocket.

In one of our recent restoration projects, an inspector noticed a beam in the home that did not meet code. Although the beam had been installed properly when the house was built, changes in code requirements since its construction meant that the beam had to be replaced for the inspector to approve the project.

Unfortunately, the client’s policy contained an exclusion for code upgrades. As a result, the homeowner had to shell out $15,000 of their own money to replace the beam.

3. Insurance Stalling & Underestimating Costs

Insurance companies often employ tactics to reduce their settlement costs by delaying claims and underestimating the cost of restoration.

They might request multiple contractor bids or take an extended time to review estimates, slowing the restoration process. This stalling can be a strategic move to wear down the homeowner so that they are willing to accept smaller settlements.

Insurance companies also use estimating software that is designed to produce minimal repair cost estimates. These systems are specific to insurance claims estimation and are not used by construction companies to budget projects. As a result, there is often a wide discrepancy between the insurance company’s estimate of repair costs and the actual cost of repairs from the contractor.

4. Potential Legal Battles

In some cases, disagreements between the homeowner and the insurance company can escalate into legal battles. This can be a lengthy and stressful process, often requiring the homeowner to hire a lawyer to help to resolve the dispute and receive the rightful claim amount.

In most cases, your contractor does not have a direct relationship with the insurance company. This means that they are legally required to resolve any failure of the insurance company to pay for work through the homeowner.

In some cases, the contractor may have to place a lien on the homeowner’s property if the insurance company does not pay for the work provided. If this happens, the homeowner should respond by taking swift legal action against their insurance company to ensure that they honor the terms of the policy.

Unfortunately, this type of escalation occurs in up to 20% of insurance-related restoration projects, or 1 in every 5 jobs.

Best Practices for a Successful Restoration

Navigating a home restoration after damage can be daunting, but understanding the roles and responsibilities can significantly ease the process. Here’s how homeowners can ensure their project goes smoothly:

1. Hire a Contractor Who Handles Claims Management

Selecting a contractor experienced in dealing with insurance claims is crucial. A contractor who understands the insurance world and can effectively communicate with adjusters can be a powerful ally. Some restoration contractors even have a full-time position dedicated to handling insurance

A professional claims manager serves as an advocate for the homeowner, managing the claims process and justifying project costs to the insurance company. Their expertise with insurance estimation software can also be invaluable in ensuring the claim accurately reflects the scope of work required.

It’s important to hire a contractor who understands how to justify expenses to your insurance company during the restoration.

2. Understand Your Policy Thoroughly

We get it — the terms and conditions of an insurance policy isn’t much of a page-turner. However, understanding the details of your policy can save you if you ever have to make use of it.

Homeowners should take the time to review what’s covered, the limits of coverage, and any exclusions present in the agreement. Doing so can significantly impact how you approach the restoration process.

It’s best to understand these details when you sign up on the policy. If not, it’s crucial to review and comprehend them before restoration begins. By taking the time to review and understand the policy, you’ll be able to make informed decisions and know your rights during the claims process.

3. Don’t Settle the Claim Until the Restoration is Complete

It’s essential not to rush into settling the insurance claim until the restoration is fully complete and all costs have been accounted for. An insurance company may pressure homeowners to accept a final settlement and close their claim before the project is complete.

Many homeowners will accept a low settlement just to put the nightmare behind them. However, you should ensure that all necessary work, including any additional repairs identified during the restoration, is included in the claim before closing it.

Submitting supplemental invoices and estimates to the insurance company can help cover any repairs that were unforeseen at the beginning of the project.

Need to Get Started on a Restoration?

By now, you should have a strong understanding of the relationship between an insurance company, a restoration contractor, and yourself as a homeowner. Now, take the next step in your research by downloading our free guide, “3 Steps to Choosing Your Contractor.” In it, you’ll find insights and advice from construction professionals on how to find and hire the best contractor for your home improvement projects.

Has a home disaster left you in immediate need of an insurance restoration contractor? Click the button below to schedule a free design consultation with a member of our team. We’ll help you navigate the insurance process from start to finish, so you never have to face the challenges alone.