How much will my restoration project cost?

Hopefully the cost of restoring your property will be fully covered by your homeowner’s insurance policy. If this is the case, the only cost to you will be your policy deductible.

The actual cost of a restoration project can be as little as a few thousand dollars to dry and repair a water damaged room, up to hundreds of thousands of dollars to tear down and rebuild an entire home following a severe fire. The purpose of homeowner’s insurance is to cover incidents like these whose cause is sudden, accidental and one-time in nature. Typically this will include burst or leaking pipes, storm damage and accidental fires. In the case of a covered loss, all costs up to the policy holder’s total coverage limit, with the exception of the deductible amount, will be covered by the insurance company.

Some causes of loss, however, typically have limited coverage, or no coverage at all, on most homeowner’s insurance policies. These include groundwater penetration, ongoing leaks that have gone unaddressed and losses due to poor construction workmanship in the past. In the event a loss is not covered, or that coverage is limited, there will be an out of pocket expense for the homeowner.

Restoration projects are usually divided into two phases, mitigation and repair, each of which is funded separately by insurance companies. The mitigation phase comes first and includes:

• ‘Stabilizing’ the damaged area (e.g. boarding up a window broken during a storm or extracting standing water from a burst pipe)
• Removing and cleaning any affected contents
• Drying any wet walls, floors, ceilings and cabinetry
• Demolishing and removing any damaged building materials
• Addressing any mold formation since the damage occurred
• Providing feedback to the restoration provider in the form or a ‘certificate of satisfaction’ survey

Insurance companies typically fund the mitigation phase before requiring the homeowner to pay their deductible. Given the urgency of getting this phase of work underway, restoration companies typically only require the homeowner to sign a ‘direction-to-pay’ in order to begin work. The direction-to-pay is a brief contract which enables your restoration provider to begin interacting with your insurance company and for your insurance company to pay the provider directly for your mitigation work.

Once the mitigation phase is complete, the repair phase comes next. This includes:

• Assessing the scope of the repair and preparing a cost estimate for the insurance company
• Agreeing the cost estimate with the insurance company so that they will begin releasing funds for construction
• The homeowner entering a contract with the restoration provider, paying their insurance policy deductible and making a deposit
• The homeowner selecting the building materials to be used (tiles, flooring, etc.)
• Purchasing the building materials and performing the construction work to return the property to its pre-loss condition
• Demonstrating to the insurance company that the complete scope of work has been performed so that they will release the balance of the funds
• Providing feedback to the restoration provider in the form or a ‘certificate of satisfaction’ survey
• The homeowner making a final payment to their restoration provider when the work is complete

While the funds for mitigation work are usually paid directly to the restoration provider by the insurance company, this is usually not the case for the repair phase. The funds for repair work are typically issued as checks to the homeowner in which case:

• The insurance company may issue a check for partial payment when the estimate is agreed, and only issue a check for the remaining balance once certain provisions have been met (like demonstrating that all of the work scope has been completed)
• The checks issued may require a co-endorsement from the restoration provider and in some cases, the homeowner’s mortgage provider, before they can be deposited

How long will my restoration project take?

Depending on the extent of the damage, a restoration project can take from as little as a few weeks up to several months to complete. During the mitigation phase, the stabilization process typically takes a few days, while the demolition and post-demolition work may take a week or two.

When mitigation is complete, and the cost of the repair has been estimated, your insurance company will review this estimate and negotiate with your restoration provider to reach a settlement. Once the claim has been settled your insurance company will begin releasing funds and you can enter into a contract with your restoration provider to perform the repair. Typical contracts require up front payment of the policy deductible and a deposit, after which the repair work can begin. The duration of the repair work can be as little as a week or two up to several months, depending on the extent of the construction required.

What risks are associated with restoration projects? What can go wrong?

Challenges that arise from time to time with restoration projects include:

• A lack of sufficient coverage to fund the whole project. Your restoration provider can help you to assess your options if this is the case.
• Failing to permanently address the initial cause of loss, leading to further damage. Often the initial cause of loss is obvious but occasionally it is not, e.g. a water leak from an unknown source within the house. If there is any doubt, be sure to engage the right professional to rectify the initial cause of loss. Your restoration provider can make recommendations for this.
• During the course of mitigation, discovering the presence of lead paint, asbestos insulation, pre-existing mold, building code violations or past improper workmanship that, once discovered, must be addressed. (The law requires it.) Insurance policies will sometimes fund the abatement of these conditions but even so, the project duration will lengthen.
• Paying insufficient attention to building material selections and then being disappointed with the choices when construction is complete. Be sure to make considered building material selections.
• Logistical challenges with providing site access to mitigation and repair technicians that increase the duration of the project unnecessarily.

What can I do to ensure my project is successful?

Doing each the following things will improve the outcome of your restoration project:

• First and foremost, ask questions about anything you don’t understand. Most homeowners are going through this process for the first time and are not experts. Your insurance company and your restoration provider can help you to understand the process.
• Review your homeowner’s insurance policy to understand the coverage you have. Your restoration provider can review this with you.
• Have realistic expectations about the scope and timing of your repair. Keep in mind that your insurance company is only required to fund like kind and quality of building materials for your repair.
• Maintain active communication with your insurance adjuster, your restoration project manager, and any other service providers associated with your loss.
• Review and sign documents, and pay invoices in a timely manner to ensure your project is not unnecessarily delayed. Of course if you have questions or concerns about anything you’re being asked to sign, raise them right away.

• Provide sufficient access to your property for mitigation and repair technicians to perform their work and stick to agreed upon schedules whenever possible. Most restoration companies utilize a lock box practice to keep your home secure while enabling access when you’re away from home.
• Remember that your restoration provider is on your If they’re worth their salt, they’re advocating for you with your insurance company and seeking to get your property back to its pre-loss condition as quickly and painlessly as possible.