As a homeowner, it is paramount that your home is insured by an insurance provider or insurance company. That is the very first thing needed once you buy a house.
With insurance covering your home, you rest assured that when you need to make certain repairs around the house or get into a repair contract, you have the right to an insurance claim over such contracts.
One of such contracts that you have a right to an insurance claim is a new roof contract. Many times, the roofing contractor would request that you sign your insurance claim over to him.
It is a well-known fact that the roofing companies teach their contractors to immediately ask for the insurance claim once the homeowner has signed the contract, who doesn’t like to get paid before they get the job done?
However, is signing over your insurance check the right thing to do? When is it okay to sign over your insurance claim? Why does the roofer want you to sign over your insurance claim? The purpose of this article is to answer these burning questions.
What Should I Do?
As a homeowner, just signing a new contract with a roofing company, you should not, for whatever purpose, sign your insurance claim to the roofing contractor.
It is hardly ever a good idea to sign over your insurance claim to the contractor, especially when the work isn’t done, or when there aren’t even signs that the contractor is willing to commence the contract.
However, there are many times that the situation would be different, and the answer to the question can as well vary with the difference in the situation.
This means that there are times when it is okay to sign your insurance claim over to the contractor, and other times when it is a terrible idea to do so.
Two Types of Insurance Policy
Before we delve into the different situations when it is okay to sign over your insurance claim to the contractor, we first need to get familiar with two types of insurance policies namely:
- The Actual Cash Value (ACV) insurance policy, and the
- Recoverable Cash Value (RCV) insurance policy.
With the ACV, your insurance claim would be sent to you in one check, at the beginning of the roofing contract. The ACV is simply your insurance claim after deducting deductible and whatever depreciation accumulated by your roof before the loss.
It is usually more affordable than the RCV as the premiums paid by the homeowner don’t account for depreciation on the roof, which is why it will be deducted from the insurance claim by the insurance providers.
However, the RCV takes account of depreciation. The RCV is simply your insurance claim after deducting deductible. You can learn how to get a new roof without paying deductibles.
This insurance claim comes in two checks. The first check would be the actual cash value, which is sent at the beginning of the contract, and the recovered depreciation amount (that would have been deducted if it was an actual cash policy) after the contract has been concluded.
When is it Okay to Sign my Insurance Claim Over to my Roofer?
If you are on RCV policy, is okay to sign your insurance claim to your roofer if the total amount of the first check is less than 50% of the construction cost that the roofer is demanding.
However, there must be pieces of evidence that the roofer is ready to work. Pieces of evidence such as making sure the roofer has delivered his materials to your home to get work started should not be overlooked, else, less than 50% or not, your roofer might decide he is no longer interested in working right after you have signed your insurance claim over to him.
It is also okay to sign your insurance claim to your roofer if you have been involved with the roofing company before, and you have built a mutual trust, where both you, the homeowner, and the roofing company are dealing in good faith.
Still, in this situation, you should not sign over an insurance check that exceeds the amount of money the roofer is asking for as the cost of repairs.
In a case where the roofer insists on a certain percent as first payment, if your insurance check is not up to that amount, it is okay to sign the check over to him after the necessary pieces of evidence to work are already in place.
When Should I Not Sign my Insurance Check Over to my Roofer?
Under no circumstance should you sign over your insurance check to the roofer if the roofer has not shown any indications that work will get started as soon as possible.
That is when there are no pieces of evidence such as him delivering work materials to your home to begin construction.
It would be foolhardy to sign over your insurance check, whether less than the first payment he’s asking for or not when there’s zero indication of his willingness to begin work immediately.
You should not sign your insurance check to your roofing contractor when your insurance check exceeds 50% of the cost of roofing demanded by the roofer as the first payment before the construction begins.
For instance, you are on an RCV policy, and you have your first insurance check of fifty thousand dollars ($50,000) with a roofing cost to the tune of seventy thousand dollars ($70,000).
Signing the insurance claim to him is giving him more than 50% of the amount before he begins work.
There are no guarantees that the work will be done effectively or even done at all after signing over more than 50% of the total repair costs to him.
Another case where it is a bad idea to sign your insurance check to your roofer, whether or not the work has been done is when the check exceeds the total amount of the cost of your new roof.
Some roofers might cajole homeowners to sign the insurance check over to them, irrespective of the amount, and they’d split the difference and return the balance.
Many times, these roofers end up bolting with the balance, leaving you with an avoidable loss and regret as you cannot recall the check since it is not a personal check, nor can you recoup the check from your insurance provider.
Therefore, you should refrain from signing your insurance check over to your constructor if it exceeds the total amount of the roofing job. It is better to do things manually; cash the check, and give whatever is due to the roofer.
Nobody wants to be a victim of fraud, so it is important to play it safe when dealing with roofing constructors or constructors generally. You shouldn’t sign your insurance check over to the roofer when there are no indications that the work has started when the check is more than 50% of the costs of the work isn’t done, when it is a first-time business, or when your insurance check exceeds the total amount of the roofing costs, even after the work is done, to ensure that the roofer doesn’t vanish with the difference that should have been yours.