Fact Sheet for Brokers: Cash Settlements

 Cash Settlements: Guiding Your Client Through the Offer  

A NIBA practice guide for insurance brokers and broking teams.

When a client’s property is damaged, the insurer can settle the claim in one of two ways:

• Repair, replace or rebuild — the insurer arranges and manages the work through its builders and suppliers, and stands behind that work (referred to in this guide as repair or rebuild).
• Cash settlement — the insurer pays the client an amount, and the client manages the repair or rebuild themselves.

A cash settlement may be the right choice for your client, but it can be a bigger decision than it first appears. There are many factors to weigh in deciding whether a cash settlement is the right outcome for your client. This guide is designed to help you work through that decision with them.

When a cash settlement can suit your client

A cash settlement may be an appropriate option where:

• The repairs are relatively straightforward and the scope of works is well understood.
• The client has trusted builders or trades they wish to engage.
• The client has the time, experience and willingness to manage the repair or rebuild process.
• The client wishes to make their own decisions about contractors, materials or upgrades.
• The client has the financial capacity to manage any unexpected costs or delays that may arise during the works.

A cash settlement can offer flexibility and greater control over the repair process. Those benefits should always be weighed against the additional risks and responsibilities that pass to the client once they accept. The remainder of this guide sets out those considerations, to help you assess whether a cash settlement is the right outcome for your client.

The key point: a cash settlement moves the risk to your client

The decision is not simply whether the settlement amount is acceptable. The real question is whether accepting a cash settlement is the right outcome for your client.

A cash settlement does more than change who manages the repairs — it changes who is responsible if things do not go to plan. When the insurer manages the repairs, it is responsible if costs exceed expectations, additional damage is uncovered, or something goes wrong during the works, and it guarantees the quality of the completed repairs. When your client accepts a cash settlement, those responsibilities transfer to them. If the settlement proves insufficient, or the repairs are not completed properly, your client may need to fund and resolve those issues themselves.

Before your client accepts a cash settlement, make sure they fully understand the responsibilities and potential financial consequences they are taking on.

What your client takes on with a cash settlement

When a client accepts a cash settlement, they take on responsibility for managing the repair or rebuild, and the risks that come with it. This may include:

• Managing the repair or rebuild. Finding and engaging suitably qualified and licensed contractors, agreeing the scope of works, coordinating trades, managing timelines, resolving disputes and overseeing payments all become the client’s responsibility.
• The risk that the settlement amount is insufficient. Repair costs can rise between settlement and the start of the works, and additional damage is often discovered once repairs begin. Changes in building regulations, planning requirements or compliance standards — such as a higher Bushfire Attack Level (BAL) requirement following a bushfire — can also increase rebuilding costs.
• Responsibility for unforeseen damage. Once demolition or repairs begin, hidden damage, asbestos, water ingress, structural issues or defective earlier building work may come to light. Unless the insurer agrees otherwise, these additional costs may fall to the client.
• No insurer guarantee over the repairs. Where the client appoints their own builder or trades, the insurer will generally not guarantee the quality of the completed work or rectify defects. Clients should confirm that their contractors hold appropriate licences, insurance and warranties, and keep all documentation relating to the repairs.
• Resolving disputes with contractors. If issues arise with the quality of the work, delays or contractual obligations, the client is responsible for resolving them. This may mean pursuing the builder or trades through their complaints process or, in some circumstances, taking legal action.
• Cash flow and funding obligations. Builders may require deposits or progress payments before work is completed. If repair costs exceed the cash settlement, the client may need to fund the shortfall themselves.
• Future insurability. Repairs that are not completed to the required building standards, or that are not carried out by appropriately licensed contractors, may affect the property’s future insurability or the availability of cover.
• Time and administrative burden. Managing a repair or rebuild can be time-consuming and stressful, particularly after a significant loss. The client should consider carefully whether they have the time, experience and capacity to manage the process.
• Full and final settlement. Before accepting a cash settlement, the client should understand whether it is intended to be a full and final settlement of the claim, whether any further costs may still be recoverable, and whether accepting the offer may affect their ability to seek additional payment if circumstances change.

Is your client experiencing vulnerability?

A significant insured event — a fire, flood or other major loss — can leave a client in a vulnerable position. They may be displaced from their home or business, experiencing emotional distress, or facing financial hardship. These circumstances can affect a client’s ability to make informed decisions, and may lead them to accept a cash settlement before fully understanding the consequences.

When discussing a cash settlement, take the time to consider whether your client may be experiencing vulnerability. A client does not need to identify themselves as “vulnerable” for additional support to be appropriate — their circumstances, their behaviour, or the information they share may indicate that they need extra assistance or more time to consider their options.

If you believe your client may be vulnerable, slow the decision down. Make sure they understand the implications of accepting a cash settlement, and work with the insurer to ensure their individual circumstances are properly considered. NIBA’s Vulnerable Customers Guidance sets out practical guidance on recognising and supporting clients experiencing vulnerability.

What a fair cash settlement should do

A cash settlement should do more than settle the claim — it should leave your client with sufficient funds to repair or rebuild their property to substantially the same condition it was in immediately before the loss.

When assessing a cash settlement with your client, consider whether:

• The settlement amount is adequate. It should be sufficient to complete the agreed scope of works, taking into account current building costs, market conditions and the client’s policy entitlements.
• The settlement reflects the risk the client is taking on. By accepting a cash settlement, the client gives up the insurer’s repair guarantee and takes on real uncertainty about the final cost. A fair settlement should recognise that transfer of risk.
• The scope of works is complete and accurate. Ensure the insurer has allowed for all damage arising from the insured event. The settlement should be supported by a clear scope of works and supporting quotations that can be independently reviewed and, where necessary, challenged.
• Legal and regulatory requirements have been allowed for. Depending on the policy, the settlement may need to allow for upgrades required by current building codes, planning requirements or local authority regulations. Always check the policy wording and any applicable extensions.
• GST has been correctly applied. Confirm whether the settlement includes GST, and whether the client’s GST registration or entitlement to input tax credits affects the amount payable.
• The client understands the responsibilities they are assuming. Accepting a cash settlement means the client becomes responsible for managing the repairs, engaging contractors, resolving disputes and meeting any costs that exceed the settlement amount.
• The basis of settlement is understood. Ensure your client understands whether the offer represents a full and final settlement of the claim, whether any further costs may be recoverable if additional damage is identified, and whether accepting the settlement affects any remaining policy benefits.
• The Cash Settlement Fact Sheet has been provided. For home building claims, insurers that subscribe to the General Insurance Code of Practice must provide a Cash Settlement Fact Sheet explaining how the settlement amount has been calculated [GICOP CLAUSE REF TO CONFIRM PRE-FINAL]. Obtain a copy, review it with your client, and seek clarification where the assessment or calculations are unclear.

Your role: you act for the client, not the insurer

As the broker, you act in your client’s best interests throughout the claims process. The insurer will explain how it has assessed the cash settlement; your role is to review the offer independently and help your client determine whether accepting it is in their best interests.

When assisting your client, you should:

• Assess whether the settlement amount is sufficient to reasonably complete the repairs or rebuild.
• Review the scope of works to ensure all damage has been identified and appropriately allowed for.
• Challenge assumptions, omissions or inadequate allowances where the settlement does not appear to reflect the full extent of the loss.
• Discuss the implications of accepting a cash settlement, including the responsibilities, risks and potential financial consequences that transfer to your client.
• Negotiate with the insurer where the scope of works or the settlement amount does not adequately reflect the client’s loss.
• Recommend independent expert advice — such as a builder, quantity surveyor or engineer — where appropriate, to validate the scope of works or repair costs.
• Help your client determine whether a cash settlement is the right outcome, taking into account the complexity of the repairs, their personal circumstances and their ability to manage the works.

Ultimately, your role is to help your client make an informed decision and to advocate on their behalf throughout the claims process.

It is also worth reminding clients of two things:

• Claims support is part of the service brokers already provide. Unlike some claims-management services, a broker does not take a percentage of the settlement, so a broker’s involvement does not reduce the funds the client has available to repair or rebuild.
• The evidence bears this out. In NIBA-commissioned research, 98% of claims with a broker involved were ultimately resolved, and 91% of clients said their broker’s involvement improved the claim outcome (CoreData for NIBA, Complexity to Clarity: The Broker Advantage, 2026).

Questions to work through with your client before they accept

• Does the scope of works accurately capture all damage arising from the insured event?
• Is the settlement amount sufficient to reasonably complete the repairs or rebuild, including any applicable building code or regulatory upgrades?
• Has allowance been made for hidden damage, cost escalation or other unforeseen issues that may arise once repairs commence?
• Does your client understand that they will be responsible for managing the repairs, engaging contractors and resolving any disputes that arise during the works?
• Does your client have the time, experience and financial capacity to manage the repair or rebuild process?
• Does the settlement represent a full and final settlement of the claim, or can additional costs still be considered if further insured damage is identified?
• Will the settlement be paid directly to your client, or is payment required to be made to a mortgagee or other interested party?
• Could accepting a cash settlement affect any remaining cover, policy benefits or future claims relating to the loss?
• Would independent advice from a builder, quantity surveyor, engineer or other expert assist your client in assessing whether the settlement is reasonable?

This guide is general information for insurance brokers and their teams. It does not take into account any client’s individual circumstances, policy terms, or the specifics of their claim — always check the policy and the client’s situation before advising. Information current as at July 2026. Applies to general insurance property claims under Australian law.