If you are the insured on the home owner's policy, you can do whatever you want to with an insurance payout. You cannot be sued by anyone because that is your money to use as you see fit. You can use the money to fix your home or use it for some other purpose. You cannot be sued. However, it is in your best interest to fix the house. Failing to get the repairs done could leave you liable for future claims. If you don't make the repairs the damage could lead to future problems and they won't be covered by the insurance company. The insurance company could deny future claims due to home owner negligence because the home was not taken care of and repaired. Many home owners repair their homes themselves, using the insurance money for supplies, and then they keep the difference. An insurance pay-out may seem like "free-money" but it is paid with a purpose and it is wise to use if for the purpose intended.