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Understanding how to negotiate a cash settlement with your insurance company when filing an insurance claim is crucial. No matter if it involves fire damage, water damage, or any other incident – understanding how best to receive fair compensation, can ensure a fairer outcome and peace of mind. 

This article will take you step by step through the negotiation on how best to settle the claim with UK insurers and obtain a favourable cash settlement. 

What are Cash Settlements?

A cash settlement means receiving a cash payment offered by your insurer as compensation for losses or damage sustained to your property. Insurance companies determine this figure based on their evaluation of your claim. 

However, this amount might not always meet your expectations or cover additional costs you’ve incurred. Open communication and negotiation between parties involved are therefore key for reaching an equitable agreement between the insurer and insurance policyholder.

What is the Difference Between a Cash Settlement and Reinstatement?

Cash settlement and reinstatement are two forms of compensation available to policyholders who suffer losses or damages that are covered by an insurance claim.  

Understanding the difference between the two is important when it comes to making an informed decision about how best you would like to be compensated. It helps businesses and individuals weigh up their options and argue their insurance claims more effectively.

Cash Settlement

  • Under cash settlement arrangements, those responsible (usually an insurance company or another liable party) offer to compensate those affected with an agreed-upon sum as compensation for the loss or damage to their property.
  • Cash settlement recipients have complete discretion in how they use the money received.
  • Cash settlements may be chosen when the cost of repair or replacement is unknown or when the affected party would prefer cash over having repaired or replaced items. Sometimes there are issues present, such as under-insurance or a partial settlement, whereby the insurance company will not pay for the full reinstatement, and therefore a cash settlement is usually the only option for both parties.


  • Under this alternative approach, the insurer will directly pay for repair work or to replace any damaged property or items.
  • Instead of receiving cash settlement payments, those affected can opt to receive services or goods to restore damaged items to their pre-loss state.
  • Reinstatement is typically sought in most claims, when the extent of damage is known, with the primary goal of restoring property to its previous state.

How to Negotiate an Insurance Cash Settlement

Steps to Negotiate a Fair Cash Settlement


The first step in negotiating a fair insurance settlement is understanding what your claim is worth. This involves obtaining and comparing repair estimates from reputable insurance contractors and considering the cost of repairs, replacement costs, and any additional costs that might arise due to your specific circumstances. 

For instance, if your home is damaged, you might need to consider the cost of alternative accommodation until the repairs are complete. Make sure to document all these expenses as they will form the basis of your settlement negotiation.

Other items to consider when quantifying your claim include the costs of electricity, emergency plumber and other contractor costs, specialist costs such as electricians, and everything else that it takes to repair your property that might not be included within the contractor’s estimates.

Determine Your Desired Settlement Value 

After doing your research, before entering into negotiations with your insurance company, have a clear idea of what you believe a fair settlement would be. This should take into account all aspects of your loss and the costs that it will take to return your property to its pre-incident condition.  

Emotional distress, inconvenience, and other related costs cannot be factored into your desired settlement value. Property insurance policies only cover the repair of your property and nothing else.

The Claims Process

It is not good practice to ask your insurance company or loss adjuster for a cash settlement from the outset of your claim. They will likely see this as a way to make savings and offer you an amount that does not take into consideration the entire repair cost, knowing that they will not be held to account in having to oversee the actual repair of your property.

Remember, you need to actually have your property repaired, so it is best to simply go along with the process of obtaining estimates for all aspects of the repair and progressing towards the authorisation of the works. Doing this will ensure that the claim is fully documented, or ‘quantified’.

Once you are in a position whereby the repair estimates are being authorised, that is then the time to consider whether you wish to request a cash settlement.


If an insurer authorises a repair estimate, then normally the works will need to take place, and the contractor produce an invoice, for the insurance company to pay it directly to them. In most cases, they will also ask for proof that the works have been carried out, such as photographs. 

In many cases, the insurance company’s own network contractor will be carrying out the repair, in which case they will arrange the invoicing directly, and you will not have to get involved. In many cases they will also arrange any alternative accommodation directly so again, this makes it easier for you.

Cash Settlements

Once you have all of your costs documented, if you wish to request a cash settlement then it is important to bear in mind a few factors.

Insurers will not pay VAT in advance of it being incurred. This means that any VAT amounts on the estimates will automatically be deducted.

In some cases, repair estimates will include ‘provisional sums’. These are costs which may or may not be incurred during the repair, such as the cost of a new fitted kitchen, should the existing one not survive the repair. It is highly unlikely that your insurer will pay any of these costs in advance, so they will again, automatically be deducted from any cash settlement.

Once the above automatic deductions have been made, your insurer will also likely attempt to make other deductions, using various reasoning and tactics.

Cash settlements are meant to be ‘full and final’ and therefore once you accept a payment, you will not be able to return to your insurance company with extra costs, if they become apparent further down the line. They will usually ask you to sign an acceptance form to this effect, before issuing any payment.


One common occurrence is that the insurance company will produce a lower-priced estimate and say that they can have your property repaired for that price, so will not increase the settlement offer.

Sometimes they will have had a contractor visit your property to produce this price. In these cases, you are fully entitled to ask for a copy of the priced estimate which details, line-by-line, the works that have been costed. You can then go through this estimate and compare it to your own, to make sure all of the required works are included. It is a common occurrence that they are not, and if this becomes the case, you should return to them with a list of missing works. This will obviously increase the price of their estimate.

In many cases, your insurer will produce a price for the works without having an actual contractor visit your property. Be very wary of accepting these costs, as it is highly unlikely that any contractor will be able to carry out the repair for this amount. If this happens, you should ask your insurance company to arrange for their contractor to come to the property so that they can confirm the works and price.

You Do Not Have To Accept The First Offer

It’s a common practice for insurance companies to start with a lower settlement offer. Don’t feel obliged to accept the first offer that comes your way. Instead, use this as a starting point for negotiations.

If you have a well-documented claim, you will be able to detail the full repair costs and use this to negotiate a fairer settlement.


It is important to remember that your insurance company are legally contracted to reinstate your property to its pre-incident condition. Do not let them make you think they are doing you a favour.

If you are not happy with any settlement offered, you are quite entitled to simply ask them to arrange the repair of your property themselves. They can either arrange for their own contractors to carry out the repair, or authorise the lowest costing estimate that you have provided. This should always be your ‘backstop’ in any negotiation.

Engage a Claims Professional

If you’re feeling overwhelmed by the claims process or feel that you’re significantly underinsured or not being treated correctly, consider hiring a loss assessor. These professionals act in your best interest and will help you manage the complexities of the claim process. They have the expertise to negotiate with insurance companies and work with you towards getting the best possible settlement for your circumstance.

Get a Written Agreement

Once you’ve reached an agreed settlement with the insurance company, make sure to get a written agreement that details the settlement amount and terms. This is crucial for not only peace of mind but it is a legal form of protection that proves the agreed-upon settlement, holds the insurer accountable to fulfil their obligation and prevents further disputes in the future.

What if You’re Not Happy with the Cash Settlement Outcome?

If you’re unhappy with how your settlement was handled or the cash settlement your insurance company offers, it is important to know you have the right to complain. Start by writing and sending a formal letter to your insurance company detailing your concerns. 

If this doesn’t resolve the issue, you can escalate your complaint to the Financial Ombudsman Service. They provide a free and independent service for resolving disputes between consumers and financial companies. They will mediate, negotiate and where necessary, investigate any disputes or disagreements to ensure a fair resolution.

How Long Should an Insurance Claim Take to Settle?

The time it takes to settle a home insurance claim in the UK can vary significantly depending on a range of factors. A straightforward case could be settled within a week, while complex claims may take much longer such as cases with extensive damage, which could even take 12 months or longer.

Many factors can impact this timeline, such as the complexity and extent of an issue or incident, and the specifics of your insurance policy.

Note that one of the most common complaints regarding insurance claims is their long processing times. For this reason, it’s essential to maintain regular communication with your insurance company and submit all required documentation promptly to help expedite this process.

Please be mindful that each case is unique, and these timelines should only be seen as estimates – the actual duration may differ significantly.

How ClaimRite Can Help

At ClaimRite, we specialise in property insurance claim management and repair, helping both individuals and businesses throughout the UK recover from property damage caused by events such as storms, fires or floods. 

Our specialists offer complete support throughout the claims process to ensure you get what is owed to you – a fair settlement.

We provide a free advice helpline offering expert guidance regarding property insurance claims. If you have questions or are concerned about a claim process, our team are on hand to provide clear, professional guidance.

If You Need Help with Your Cash Settlement, Contact Us Today

If you would like to speak to an expert about this or any other aspect of your claim, call our free Property Claim Helpline on 0800 002 5819, for a no-obligation consultation.


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