Home insurance payout instead of repair
7 minute read Published on Aug 20, 2025 by BrokerLink Communications
When you file a claim with your insurer for home repairs and reach your settlement, you may be wondering whether you can opt for a cash settlement rather than the repairs. Who receives the money? What if you don't want to go through with the repairs? For more info, stick around.
Can I opt for a home insurance payout instead of repair?
The short answer is yes. It is possible to get a cash settlement for your insurance claim instead of having your insurance provider conduct repairs. However, several factors need to be taken into consideration, as each claim is different and can vary between your insurance company, their claim process, your individual policy details, and whether you have a mortgage or not.
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Question |
Answer |
|---|---|
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Can I take a cash payout? |
Yes, depending on your policy and mortgage status |
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Who gets the payout? |
You, your contractor, or your mortgage lender—depends on the situation |
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Do I have to use the payout for repairs? |
Often yes, but not always—read your policy and check lender requirements |
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Downside of not repairing? |
Reduced coverage, refusal of future claims, or lowered property value |
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Key Tip |
Always speak to your adjuster before declining repairs |
Who does my insurance company give the payout to?
Which party receives a home insurance payout depends on the circumstances surrounding the claim, including:
1. Contractors
Some insurance providers have a list of contractors they work with during claims and will only provide funds to the contractors directly. In other instances, homeowners can work with their own contractor and submit receipts to their insurer for reimbursement.
2. Your mortgage lender
Have a mortgage on your home? Your home insurance payout may be sent to your mortgage lender directly. Should this happen, you'll need to work with your lender directly to determine how the funds are allocated.
3. Homeowners
If your insurance policy does not specifically state how the payout needs to occur or how the money needs to be spent, you can realistically take the money from your payout and use it as you wish.
Pros and cons of taking a home insurance payout
Below is a list of pros and cons for taking a home insurance payout instead of having the insurance company pay for your repairs:
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Pros |
Cons |
|---|---|
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Flexibility: Use the money how you want if no restrictions apply |
Future claims risk: New damage may not be covered if you don’t repair |
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Control: Choose your own contractor, materials, or timeline |
Mortgage restrictions: Lender may require funds to go directly to them |
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Faster resolution: May be quicker than scheduling and completing repairs |
Decreased home value: Unrepaired damage can lower resale or appraisal value |
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Keep the difference: If repairs cost less than the payout, you keep the extra |
Policy violations: Misusing payout funds may violate your insurance agreement |
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Delay work if needed: Take the payout now, repair later (if allowed) |
No warranty or guarantees: You're responsible for repair quality |
Should I file a claim if the repair costs aren't that expensive?
Before you submit a claim, compare the repair estimate and your deductible amount. If the repairs are less than your deductible, it may be worth paying out of pocket to avoid an insurance premium increase. In contrast, if the repairs are more than your deductible, getting a lump sum payment for damages from your insurer is a better option.
How does a home insurance claims process work?
If you need to file a claim with your insurance company, here's a general look at what the claims process will entail:
1. Document the damaged property or losses
Before you submit an insurance claim, you'll need to document evidence of the damage your home has suffered. The more evidence you provide of the extent of damage, the easier it will be to be reimbursed by your insurance company.
2. Contact your insurance company
Next, you'll need to call your insurance company and speak with a claims agent. During your call, the agent will ask you to provide details about what happened. Typically, you can anticipate being on the phone for at least 30 minutes. Once the call is over, the agent will provide you with a claim number.
Within the next couple of days, you will be contacted by an adjuster who will handle your claim from that point forward.
3. Get a repair quote from a general contractor
In most cases, you'll need to contact a contractor to determine what necessary repairs are required. During this time, the contract will also provide an estimate of how much the repair damages are going to cost. Once your adjuster approves, you can go ahead and have the contractor repair your home. If they do so before your settlement, make sure you keep the receipts and file them with your insurer.
4. Get your insurance payout
If you receive your payout from your insurer and close your claim file, you'll receive your settlement funds once you've signed your release contract. Once you have your payout, the money is yours to do what you want with it. In other cases, your insurer will only provide funds for your settlement once the repairs have been completed. It really depends on your insurer, your homeownership status, and the terms and conditions of your policy.
How can I prevent home insurance claims?
To prevent home insurance claims, take a look at some home protection tips below. To prevent flooding in your home caused by heavy rainfall, consider installing a sump pump, backwater valve, and tankless water heater. Additionally, consider the following:
- Clean your gutters in the fall and winter to prevent clogs.
- Ensure your HVAC system is working correctly by booking a yearly maintenance appointment. This will help you prevent home insurance winter claims caused by insufficient indoor heat.
- Have a professional plumber inspect and clean your plumbing system once a year.
- Have a neighbour check on your home while you're on vacation.
- Update your home security system.
- Never post that you are away on holiday until you're back, as it can invalidate your home insurance.
What does a home insurance policy include?
While standard home insurance coverage may vary between insurance companies, Canadians can anticipate the following:
Dwelling insurance
Dwelling insurance protects the physical structure of your home from various perils, including:
- Fire and smoke damage
- Theft and vandalism
- Weather damage, including hail and high winds
- Car/aircraft impact
- Explosion
- Falling objects due to extreme weather
Personal property coverage
Personal property insurance covers your personal belongings within your home from damages and losses. When purchasing your insurance, you'll need to provide a home inventory of your items and how much they are worth, so your insurance company can determine how much coverage you need.
Note that if you own high-value items like artwork or jewellery, you may be required to purchase high-value home insurance to ensure you are sufficiently protected.
Additional living expenses
In the event that your home suffers structural damage as a result of a covered peril to the extent that it is not safe to live in, additional living expenses will cover the cost of accommodations, meals, and other associated expenses while you are unable to live in your home.
Third-party liability insurance
Third-party liability insurance protects your interests in the event a third party suffers a bodily injury or property damage at your home and files a personal insurance claim against you. Should a lawsuit be filed, this policy will cover the cost of repairs, replacements, medical expenses, legal fees, and other payments associated with your settlement.
What does home insurance not cover?
Although home insurance does a great job of protecting the interests and finances of homeowners, there are some things that aren't covered in standard insurance policies. For example, natural flooding that causes water damage in your home is not automatically covered. In this case, you'd need to purchase separate overland water damage coverage, which comes in handy if you live in an area with natural waterways and heavy rainfall throughout the year.
Further, standard insurance does not cover mould or cover appliances damaged by a lack of maintenance or old age. Other perils not covered by insurance companies include pest control, given that it is the homeowner's job to maintain their property throughout the years.
To ensure you understand what is and isn't covered, review your home insurance policy so you fully understand whether or not you need to purchase additional coverage.
How much does home insurance cost?
The average home insurance cost in Canada varies between $1000 and $2000 a year. It all comes down to where you live, the current condition of your home, how much coverage you choose, the value of your personal property, your previous claims history, and other factors that make up your risk profile as a customer.
How can I save on my premium?
Should you file an insurance claim under your homeowners coverage, it's likely that you'll face a premium increase the following year. To offset some of these costs, here are some tips you can use to get a more affordable rate:
- Bundle home and auto insurance: If you have other forms of coverage, bundling home and auto policies with the same insurance company can provide a discount.
- Work with an insurance broker: Brokers work independently from insurers, allowing them to shop around, customize coverage, and answer any concerns you may have free of charge.
- Pay your insurance premium upfront: Insurance providers charge administration fees for customers who pay monthly. To avoid these fees, pay your premium upfront.
- Shop around and compare multiple quotes: Before choosing an insurance policy, shop around and compare quotes from different insurers so you can find the best deal available.
- Ask about other discounts: There are numerous discounts you may qualify for as a homeowner. Ask your insurance agent or broker which ones may be available to you.
How BrokerLink can help
At BrokerLink, we help homeowners acquire affordable homeowners insurance. With access to numerous policies from some of Canada's top insurers, our brokers can customize your coverage to fit your needs and budget. We're also here to provide home insurance advice, read your policy before contacting your insurer, and more. Beyond standard home insurance, BrokerLink can help customers with: