Contractor wants to take most of insurance money to replace roof

[Terry Hollinsworth]

Contractor agreed to replace my roof if insurance would pay for damages. He came to my door offering his service. To my surprise the insurance company agreed to pay $21,000 for damages. Our contractor quoted us $20,000. Average prices in our area to replace a roof is $11,000 for the size house we have. I'd like to repair other things around the house with the difference. But the contractor made us feel guilty that he worked hard to get us a $1000 in cash. Contractor says his quote is non negotiable and won't budge on price. 

My question is am I missing something? Should I pay the contractor all the insurance money? Why is there a big gap between average roof replacement costs and insurance award?