This clearly isn't something that happens frequently, and sadly isn't something I'd recommend anyone try to replicate. There is a story with a lesson that goes along with this check.
Rewind to 2014
In the second half of 2014, we were doing a lot of home renovation projects. We had a large bonus room we were converting to a bedroom and adding a bathroom to it. At the same time, we were also remodeling an existing bathroom. The project started in last August and by early December we were getting close to being done. Normally we're a bit faster, but my wife had a baby in this window and she's the handier one in this duo.
Part of the bathroom work involved moving the toilet to a different part of the bathroom. Shortly after the toilet was installed in the new location, we went on a week-long vacation to introduce our new baby to our family. We had a great time on the trip but when we got home, we were greeted by water running out of the garage. Not good.
The brand-new supply line for that newly repositioned toilet sprung a small leak. Normally this wouldn't be a big deal, but it must have gone on for several days. This was also an upstairs bathroom, right above the kitchen, and when I entered the kitchen the ceiling had fallen to the floor. Welcome back from vacation, right?
This was a pretty emotionally draining time for us. We had a newborn, and weren't getting much sleep already. We were so close to having our house put back together and then this. Now we had to rip out carpet and worry about replacing warping wood floors. We had some money saved up, we just didn't really want to spend it on all these additional projects. I spent that first night and the entire next day ripping out soggy carpet and trying to dry things out.
Submitting an insurance claim wasn't actually my first thought. After all, I was the one who installed the toilet supply line. What if I did something wrong and they said they wouldn't cover the damage? I went back and forth for a day or two before a co-worker reminded me that this is exactly why you have insurance. It doesn't matter whose fault it is, so long as it was an accident. We called our insurance and they stepped in were a huge help.
If you've never had to deal with a homeowners insurance claim, here's how it goes. They first bring in a restoration company. In our case, because the water was clean water and not sewage, the cleanup was mostly just drying things out. This involved several dehumidifiers and fans placed throughout the house running 24/7 for almost a week.
Our kitchen was a pretty much unusable as they tried to salvage the wood floors by sucking out all the water. This was our kitchen for a week or so:
Once our house was completely 'restored' and dry, we were ready to start actually fixing things. The adjuster had come through and identified the cause and everything that had been damaged. He ran some fancy software that quickly spit out an estimate of how much it would cost to repair/replace everything.
In pretty short order, we got deposits to our bank account and were able to start putting things back together. We ended up spending a little bit more than our insurance gave us since we upgraded some things from what they were before the damage. For example, we upgraded one room from carpet to hardwood floors, and ended up replacing the majority of our carpet instead of just the section that was damaged. As much as possible, we did work ourselves. Placing rolls of insulation in the floor joists in the crawl space is simple and only took three hours, but I saved $500 doing it myself.
Our insurance policy had a $1,000 deductible, meaning we had to pay $1,000 before the insurance kicked in. I didn't actually have to pay anyone, the insurance just paid us $1,000 less than what they estimated the damage to be. As part of the adjuster's research, he also took the faulty braided supply line with him to send to a lab to see what went wrong. At the time, we were told that the insurance company was going to attempt to recover costs from the manufacturer if they found it to be improperly made. If they were successful in getting anything back, the first $1,000 would go to pay us back our deductible.
3 Years Later
I don't talk to my insurance company often. Whenever I did, I would ask about the status of getting this $1,000 back. A few months after the incident, I was told that it was tied up with lawyers in a class-action suit. Having been involved in other lawsuits at work, I knew this meant it would take a long time.
Maybe 18 months after the event, I was told that the company that made the supply line had gone bankrupt and the odds of recovering anything had gone down substantially. At that point, I mentally wrote it off.
Imagine my surprise then, when my insurance company called me the other day and asks how I wanted to receive the payment. I was like, Cash Please!
So Now What?
So, I've got an extra $1,000 I wasn't expecting. Now what? For me, it's pretty simple. I'm not going to go out and buy anything I wasn't already planning on getting. If I want something bad enough, I fit it into the budget and I buy it. I don't need an excuse of having extra 'found' money to do so.
In this regard, I like Dave Ramsey's baby steps, which says that you focus on whatever step you are on in the wealth building process. We are on baby steps 4, 5, and 6 (save 15% towards retirement, save for kids college, and pay off the house early), but are taking a quick breather to beef up our emergency fund (baby step 3). We have enough cash in our emergency fund for any typical emergency but want to make sure we have enough to buy a new car on top of our normal emergency fund amount.
All that to say, this money is just going into our savings account since that's our area of focus. Once that's beefed up enough, every extra amount goes straight to the mortgage.
So that's my recent surprise and my boring plan for what I'm doing with it. I hope you can find some extra money, too, I just don't recommend this path for finding it.