Making a Claim: Should You Take a Cash Settlement or Let the Insurer Handle Repairs?

The Pros and Cons Every Policyholder Should Know

When you lodge an insurance claim — whether it’s for storm damage to your home, an accident involving your vehicle, or damage to your commercial premises — your insurer may give you two options:

1. They’ll organise and manage the repairs for you, OR

2. They’ll offer you a cash settlement so you can handle the repairs yourself

Both options can be suitable — but it’s important to understand the benefits and potential pitfalls of each, before making a decision that affects your finances, timelines, and protection.

Let’s break it down:

Option 1: Letting the Insurer Manage Repairs

Most insurers prefer to manage the repair process themselves. This is also the default option under many policies unless otherwise agreed.

✅ Pros:

• Repairs are project-managed for you. You don’t need to chase quotes, trades or approvals — the insurer handles it all.

• Insurer guarantees the work. Most insurers offer a lifetime repair guarantee if they use their own network of authorised repairers or builders.

• Compliance and quality control. The repairs are completed in accordance with policy conditions and safety standards.

• No delays with managing finances. You don’t need to fund repairs up front, pay trades, or negotiate with multiple providers.

  
  

❌ Cons:

• Less choice of tradespeople. You may not get to choose who does the work (though you can raise concerns if needed).

• Delays possible during busy claim periods. After large storms or natural disasters, insurer-recommended repairers may be in high demand.

• Insurer may prioritise repair over full replacement. Depending on your policy wording and damage severity, you may repair rather than replace.

  
  

Option 2: Accepting a Cash Settlement

In some cases, the insurer will offer you a cash payout based on the assessed cost of repair (not the replacement value). You then take responsibility for organising and paying for the repairs yourself.

This can suit certain clients — but comes with more responsibility and risk.

✅ Pros:

• You choose your contractor. Ideal if you already have trusted builders or specialists you want to use.

• Flexibility in repair style or timing. You may choose to upgrade materials, combine claims with other renovations, or delay repairs.

• Potential savings. If you can find similar work at a lower cost than the insurer’s estimate, you may pocket the difference (unless otherwise specified).

❌ Cons:

• The payout may be less than your actual cost. The settlement is based on insurer-assessed repair value — which may differ from real-world quotes, especially in rural or high-demand areas.

• No workmanship guarantee. If you accept cash and choose your own trades, you’re responsible for any defects or disputes — the insurer will not step in.

• Funds may be delayed. Depending on the claim, you may receive partial payment upfront and the balance once the work is completed — especially for large repairs.

• Risk of underinsurance or scope errors. You’ll need to fully understand the scope of approved repairs — otherwise, you could be left out-of-pocket.

  
  

What Should You Consider When Deciding?

Ask yourself:

• Do I trust the insurer’s recommended builder/repairer?

• Am I confident managing trades, payments and inspections myself?

• Could I end up out of pocket if costs run over?

• How complicated is this repair — and do I have time to manage it?

Also: Your insurer may not offer a choice for some claim types (e.g. motor repairs after a no-fault accident) — so it’s worth discussing your options as early as possible in the claims process.

Talk to Your Broker First

As your broker, we can:

• Help you understand the repair scope and payout estimate

• Flag any policy conditions or exclusions that might affect your choice

• Advocate if you're unhappy with repair workmanship or settlement amount

• Help you document the process properly if you choose your own repairer

In Summary

	Insurer Repairs	Cash Settlement
Convenience	✅ Insurer organises everything	❌ You're responsible for the full process
Choice of Trades	❌ Limited	✅ Full control
Guarantees	✅ Covered by insurer guarantee	❌ No guarantee unless you arrange it
Financial Risk	✅ Insurer carries risk of overrun	❌ You carry the cost if repairs exceed payout
Flexibility	❌ Less	✅ More

Not sure which path is best for your current claim? We're here to support you and make sure you feel confident every step of the way.