Insurance excesses and cash settlements: what to check before agreeing

Check the excess on your policy

Read the policy schedule or Certificate of Insurance and confirm any additional event-related excess. The amount applying to another person or a different policy isn't necessarily yours.

Who would organise the repairs?

Under an insurer-managed repair, the insurer arranges the approved work. If you accept cash for some or all of the claim, you may need to find and manage tradespeople yourself. ASIC Moneysmart warns that an offer based on the insurer's preferred supplier could be below the price you'll pay for your own repairs.

Read the written scope of works

Check the following items against the actual damage, policy terms and the insurer's proposed payment:

• Which rooms, structures and items are being repaired or replaced?

• Are drying, demolition, disposal, materials and labour included?

• What about testing, certificates, required approvals and reinstatement?

• Are GST, access, storage or any insured accommodation costs covered?

• Which costs are excluded, and has the applicable excess already been deducted?

Questions before you accept

Ask for the answers in writing. A cash settlement offer should be assessed against the work it is intended to pay for, not just the headline figure.

For insurance treatment of leaks, see Home insurance water leaks: the failed part versus resulting damage. If you're disputing an offer, see Preparing a complaint about an insurance claim decision.

• What other settlement options does the policy allow, and could I obtain independent repair quotes?

• Does accepting this payment settle the whole claim or only part of it, and what review rights or deadlines would remain?

• If more damage is found or contractor costs differ, how would the insurer handle that?

• What work, approvals and trades would become my responsibility?