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Contingent Contract Help

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We needed homeimprovements due to storm damage. We met with a contractor who had typed up a contract with what needed to be done and costs. Somethings needed to be changed and a line was drawn though and the correction or additon was hand written in. We also added "Contract contingent upon insurance approval". The contractor and both of us initialed all handwritten items.We gave him a check for 1/3 which has been cashed. To make a long story short the insurance company did not come up with the enough to cover the full cost. They sent us checks which we must have endorsed by our mortgage company which is out of state. The contractor offered to find financing for the differance but we did not want to finance anything. Then the contractor said if we don't sign within 5 days the contract will expire as it was only good for 30 days from the signing date. I told him I did not see that in the contract(which it is not) or remember him telling us of this before. He said there has been a 15 percent cost increase and if we wait we would have to rewrite the contract to reflect this. The insurance compnay said they do not care if we use a different contractor, but to make sure we are totally released from this one first. We have found one that is reputable and would do the work for the money allowed by the insurance company. What would be the proper procedure to make sure that there is no contract in effect between us and to get my money back? Should it be something in writting or if I ask and they say O.K. and write me a check is that enough? Obviously I want to do this properly. Any help would be much appreciated. We are in MN if that matters.

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