Disaster Resilience

Rebuild costs are often higher than the cash offered.

When an insurer offers a cash settlement, it may be based on what it can get repairs done for, not what you will have to pay. Insurers have strong bargaining power, preferred builders, and bulk-rate discounts, so their costs are usually much lower than retail prices.



After a natural disaster, repair costs often rise sharply. Builders are in high demand, and long delays and material shortages drive prices higher. If the cash payout doesn’t match the real-world cost of repair or rebuild, you could be left to cover the gap yourself.

Before accepting a cash offer, it’s important to get independent quotes to confirm whether the amount is sufficient to fix all the damage.

Fees and debris removal may not be included.

A cash settlement might look reasonable at first — but it may not cover all the costs of rebuilding a damaged or destroyed home.

Some common items often left out include:

• debris removal and site clean‑up
• demolition
• professional fees (for example, architects, engineers or building surveyors)
• upgrades needed to meet new building standards
• temporary accommodation
• storage for your belongings

If your policy includes these types of cover, they should be included in the settlement amount. Once you accept a cash payout, any hidden or undiscovered damage may no longer be covered. Without a full assessment by a builder or engineer, you may not realise what’s missing until later — when it becomes your responsibility to pay for it.

This is why it’s important to have a thorough inspection before accepting a settlement offer.

3. Your lender may need the funds

Part or all of the payout may be paid directly into your bank account.

If you have a mortgage, your lender usually has a legal interest in your home. This means they may have rights to any insurance payout related to it. In some cases, part or all of a cash settlement may be sent directly to the bank rather than to you.

Banks may require you to:

• pay down part of your loan
• use the funds in a certain way
• get approval before starting any repair work

This can affect how much money you have available to rebuild and how quickly repairs can begin. It’s important to talk to your lender early to understand their process and any conditions they may place on the settlement.

4. Your cover may end early

Insurance cover can stop once you take the cash.

When you accept a cash settlement, your insurance policy may end — even if your home remains damaged or unsafe. Once the policy ends, your insurer won’t cover any new damage, and they may not cover hidden damage you discover later.

It can also be difficult to obtain a new policy while your home is damaged. Many insurers are reluctant to insure homes that need major repairs, which may leave you unprotected for weeks or months while you organise the rebuild.

This gap in cover can be risky. It’s worth asking your insurer whether they can keep you covered until repairs are completed, or checking what options are available before agreeing to the payout.

5. More work falls to you

Managing trades and timelines becomes your responsibility.

If you accept a cash settlement, you take on the role your insurer would usually play.

This means you become responsible for:

• finding and checking qualified trades
• getting quotes
• managing timelines
• resolving problems
• making sure work meets building standards
• handling cost blowouts

Rebuilding after a natural disaster can be complex and stressful. Skilled tradespeople may be in short supply, and delays are common. If you don’t have the time, confidence or expertise to manage a major building project, it can become overwhelming — and costs can rise quickly.

If you prefer the insurer to manage repairs or want the protection of the insurer’s repair guarantee, a cash settlement might not be the best option.