How home insurance cash settlements work

Last updated: 15 July 2026

If your insurer offers a cash settlement instead of organising repairs, it's important to understand what you're agreeing to.  

What is a home insurance cash settlement? 

If you submit a claim on your home insurance, the insurer might offer to pay you an agreed amount (a cash settlement) instead of arranging repairs or replacing damaged items. If you accept the payment, you’re usually responsible for organising and paying for repairs yourself.  

A cash settlement can give you more flexibility and control over the repairs you make and the tradespeople you use - but it can also leave you out of pocket if the amount doesn't cover all your repair costs. 

How cash settlements work 

Step 1: You make a claim 

After your home is damaged, you contact your insurer and lodge a claim. The insurer will assess the damage and decide if it's covered by your policy. See our tips on how to make a home insurance claim.  

Step 2: Your insurer assesses the damage and cost of repairs 

The insurer assesses the damage and estimates what it would cost to repair, rebuild or replace the damaged property.  

If your claim is approved, and involves significant rebuilding or repairs, you’ll get a written report. This is known as a 'scope of works' or 'statement of works'.  Take the time to read this report and understand what will need to be done to complete the repairs or rebuild. 

Step 3: You may receive a cash settlement offer 

The insurer may offer you a cash settlement or you may also request a cash settlement. If a cash settlement is offered and this is not the only option to resolve your claim, your insurer will give you a Cash Settlement Fact Sheet that will include: 

• alternative settlement methods, if available  
• the sum insured 
• the total amount of cash settlement being offered 
• a breakdown of each component of the cash settlement 
• a statement for you to consider obtaining independent legal or financial advice before settling 
• information about your right to request a review 

The offer will be for the repairs that are covered by your policy and outlined in the scope of works.  

If you don't understand something, ask questions. Don't feel pressured to accept a cash settlement quickly.  

Step 4: You decide whether to accept 

Take the time to review the offer carefully.  

If you accept a cash settlement, you will usually be responsible for managing the repair or rebuild yourself. This includes finding and managing builders and tradespeople, obtaining any required approvals, and making sure the work complies with building standards and council requirements.  

Depending on your claim, it may also be helpful to:  

• get your own repair quotes, to check the scope of works and the amount being offered is realistic. 
• ask your insurer to explain in more detail what's included and excluded from the settlement, including any costs for temporary accommodation, debris removal, storage or other policy benefits. 

If you decide to manage the works yourself, make sure you comply with council regulations and building codes. Always use a licensed builder. If you don't, your home may not be insurable.   

If you find further damage or would like to request a review of the settlement, you should contact your insurer.  

If you have a mortgage over your home, contact your bank before accepting a cash settlement. Depending on their policies, the cash settlement may be paid to the bank. 

 Pros and cons of accepting a cash settlement 

Potential benefits of a cash settlement 

• you can choose your own builder or tradesperson 
• you can decide when the repairs happen and exactly what repairs you make 
• you’re not tied to your insurer's repair process 
• it may be quicker than waiting for insurer-managed repairs.  

Potential risks of cash settlement 

• the amount of cash settlement you receive may not cover the actual repair cost – insurers may be able to access discounts with their preferred suppliers, so the quote could represent what it would cost the insurer to make the repairs, not what it will cost you.  
• important repairs may be missing from the insurer's estimate 
• you become responsible for managing the repairs – you’ll need to get quotes, hire contractors and manage the work. This may be more difficult if there has been a natural disaster 
• delays in repairs may lead to additional damage which will not be covered by the cash settlement. The price of materials and labour may also increase over time. 
• repairs completed by builders you hire will be subject to their warranties and will not have a lifetime guarantee, which is often offered for repairs managed by the insurer 
• you may have to pay for some additional repairs yourself if further damage is discovered.  

What to do if you’re not happy with the cash settlement offer 

If you think the offer is too low - If you want to take a cash settlement but think the amount offered is too low or does not cover all the repairs required, ask the insurer to explain the calculation in detail or seek further quotes. You can also provide extra quotes or other evidence that you’ve sourced yourself. 

If you don’t want a cash settlement – If you’d prefer the insurer to arrange and manage the repairs, you can decline to accept a cash offer from your insurer.  

How to make a complaint  

If you’re still unhappy with the outcome after discussions with your insurer, you can complain.  

Your first step is to complain to the insurer, using their formal complaints process. Put your complaint in writing and include: 

• the word 'complaint' in the heading or subject line 
• your name, contact details and the date 
• a clear explanation of the problem and the outcome you want 
• copies of relevant documents, such as receipts, invoices, bank and other financial statements  

Keep the originals of any documents you send and a copy of your complaint letter. Read our guidelines on making a complaint.  

If you’re not happy with the outcome from your complaint, you can escalate the matter to the Australian Financial Complaints Authority (AFCA). AFCA is an independent and free service. Learn more about making a complaint to AFCA.