Step 1
You always pay your deductible
This is your out-of-pocket responsibility before insurance pays. It goes to your contractor, not the insurance company. Never work with a contractor who offers to "waive" it — that's illegal in FL.
Restoration Billing
How Restoration Billing Works: Deductibles, Payments, and What You Owe
Understanding how money flows during an insurance claim — deductibles, direct billing, depreciation holdback, and supplement payments — prevents confusion and ensures you receive everything your policy covers.
- Deductibles
- ACV vs RCV
- Direct Billing
- Depreciation
Key Steps
What you need to know
Step 2
Understand ACV vs RCV payment stages
With Replacement Cost Value (RCV), you get Actual Cash Value (ACV = replacement cost minus depreciation) first. The remaining depreciation is released after repairs are completed and receipts submitted.
Step 3
"Direct billing" means the contractor handles insurance paperwork
You authorize the contractor to communicate with insurance on billing. But you remain the policyholder — if insurance underpays, you're still responsible for the difference.
Step 4
The first check may seem low — that's often normal
If you have an RCV policy, the first check reflects ACV (depreciated amount). The rest comes after work is done. Check if depreciation is being held before assuming you're being lowballed.
Key Takeaways
Your deductible is always your responsibility — no legitimate contractor waives it
RCV policies pay in stages: ACV first, then depreciation after repairs are completed
"Direct billing" means the contractor handles insurance paperwork, but you're still the contract holder
Always submit completion documentation to recover your depreciation holdback
Supplements are normal and adjust the claim for hidden damage found during work
FL's AOB ban means you stay in control of your claim and payment authorization
In-Depth Guide
Understanding the process
The financial flow of an insurance restoration claim confuses most homeowners because it involves multiple payments, deductions, and stages that don't follow the pattern of normal consumer transactions. Understanding this flow — deductible responsibility, ACV vs. RCV payment stages, supplement payments, and depreciation recovery — prevents the confusion and frustration that can derail an otherwise successful claim.
The two-stage payment structure of RCV policies is the most common source of confusion. When your insurer approves a claim for $40,000 in restoration work, the first check will be for the ACV amount — say $28,000 — minus your deductible. The $12,000 difference is depreciation being held back until you complete the repairs and submit documentation. This is not the insurer shortchanging you; it is the standard RCV payment structure designed to ensure repairs are actually completed. Many homeowners mistake this initial payment for the full settlement and either panic or accept it as final — both reactions are premature.
Direct billing arrangements between your restoration contractor and insurance company simplify the payment process but do not change your fundamental financial responsibilities. Under a direction-to-pay agreement (the post-AOB standard in Florida), you authorize the insurer to send payment directly to the contractor. The contractor handles the paperwork, estimate negotiations, and supplement filings. However, you remain the policyholder — if the insurance payment falls short of the contractor's invoice, you are responsible for the difference. This is why choosing a contractor who works within insurance-standard pricing (Xactimate) and has experience negotiating with carriers is essential to preventing out-of-pocket surprises.
Visual Reference
Insurance and restoration in practice
Real-world examples of the documentation, coordination, and processes involved in insurance claims.
Understanding the Numbers
Comparing the insurance check to the contractor's estimate — and understanding depreciation holdback — prevents confusion.
Xactimate Line Items
Every line item in the Xactimate estimate corresponds to a specific repair task and cost. Review them carefully.
Understanding Your Payment
The first insurance check often appears lower than expected because it reflects ACV (depreciated value). The remaining depreciation is released after repairs are completed and documented.
Completed Restoration
After repairs are completed and documentation submitted, the insurer releases the depreciation holdback. Reviewing final numbers ensures all supplements and depreciation have been paid.
Step-by-Step
How the process works
Understanding each step gives you leverage and helps prevent common problems.
1
Understand your deductible
Check your policy for standard and any special deductibles (hurricane, wind/hail). This is what you pay out of pocket.
2
Review the initial payment
Insurance issues ACV check first (if RCV policy). Compare to the estimate. Understand what depreciation is being held back.
3
Complete repairs and submit documentation
Your contractor provides completion certificates and invoices. Submit to insurer to trigger depreciation release.
4
Recover depreciation and close the claim
Insurer releases held depreciation. Review final numbers. Ensure all supplements were paid. Sign off on the completed claim.
State-specific notes
South Florida
FL's AOB ban means you sign a "direction to pay" rather than assigning your claim. You retain responsibility and control. Hurricane deductibles add complexity.
Charlotte / NC
NC billing processes are generally straightforward. Standard deductibles, standard RCV/ACV structures. Less regulatory complexity than FL.
Coastal SC
Wind pool claims may have different payment structures. Verify whether your wind claim goes through the SC Wind Pool or your standard homeowners carrier.
Common Questions
Frequently asked questions
Why does my first insurance check seem so low?
If you have a Replacement Cost Value (RCV) policy, the first check reflects Actual Cash Value (ACV) — the replacement cost minus depreciation. The insurer holds back depreciation until repairs are completed and documented. This is normal. A $30,000 claim might result in an initial check of $20,000, with the remaining $10,000 released after you submit completion receipts.
What is the difference between ACV and RCV policies?
ACV (Actual Cash Value) policies pay the depreciated value of damaged items — you never recover the depreciation. RCV (Replacement Cost Value) policies pay full replacement cost, but in two stages: ACV first, then depreciation after repairs are completed. RCV policies cost more in premiums but provide significantly better coverage. Check your declarations page to confirm which type you have.
Is it legal for a contractor to waive my deductible?
No — in Florida, waiving or absorbing your deductible is illegal and constitutes insurance fraud. In other states, it may violate your policy terms and void coverage. Your deductible is your contractual responsibility. Any contractor who offers to "cover" or "waive" your deductible is a red flag and should be avoided.
How do I recover my depreciation holdback?
After repairs are completed, submit the contractor's final invoice, completion certificates, and photographs showing the finished work to your insurance company. The insurer reviews the documentation and releases the held depreciation. There is typically a time limit for claiming depreciation — check your policy for the specific deadline, which is often 180 days to 2 years after the loss.
What happens if the restoration cost exceeds the insurance estimate?
This is common and is handled through the supplement process. When hidden damage is discovered during restoration, your contractor documents it and submits a supplemental estimate to the adjuster for additional funds. Supplements are a normal part of significant restoration projects — they adjust the claim to reflect the true scope of work discovered during repairs.
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