When you have a claim and you have a mortgage on your policy, the claims check will be made out to all named insured and the mortgagee. Until your home is paid in full, the mortgage company has a legal interest in your home.
While it is extra steps for you, making the check out to all named insureds and mortgagees is required by law. This protects you and the mortgage company from fraud.
Your contractor is ready to start work on your home, and now this arises. Most contractors will be accustomed to dealing with checks made out to mortgage companies and insured’s, don’t stress about getting it taken care of.
First, contact the loss draft department of your mortgage company. This department handles insurance drafts. Many mortgage companies have different guidelines based on the amount of the claim.
In smaller claims, they may sign the check with copies of your estimates and a statement from you verifying the damage will be repaired.
Some mortgage companies make the process simple. You provide proof of the loss, a copy of the contract from the repair companies, and the mortgage company will sign off on the check. This process is the easiest to deal with.
Other mortgage companies will not sign the check until you have a final invoice from the contractor. They may also require a conditional lien waiver from your contractor. This waiver states that your contractor forfeits the right to place a lien on your property if they are not paid. Other mortgage companies require a signed affidavit from you and the contractor that the damage will be repaired.
For large claims, your mortgage company will probably inspect the damage prior to signing the check. They may request pictures or video or send a representative to inspect the completed work. For extensive damage, the representative may have to come out multiple times through the process.
Other companies will hold the claims payment in escrow and release it to the contractor themselves. They may choose to release the payment throughout the job or at the end.
Some mortgage companies will meet you at a local branch to sign the check. The representatives will request photos, proof of loss, and proof the damage is being or has been repaired.
How your mortgage company handles this is completely up to each company. There are no state laws or guidelines and your insurance company cannot force them to handle the process in any certain way.
If your contractor is requiring a deposit to begin the work, let your mortgage company know. They can process the check in the escrow process so funds can be released over multiple payments.
Your contractor should be used to the process of dealing with the mortgage company. Larger contractors may have you sign the check and handle the back and forth with the mortgage company themselves.
Sometimes your contractor will have their own insurance payment department just to alleviate the stress from their clients of handling the payment. If you do sign the check over to them, wait until the work is complete. If you sign it over before they start you will have no recourse if the work is not completed.
Claims that include property damage and contents are a little different. Your mortgage company only has an insurable interest in the dwelling structure.
They should release the funds for your contents immediately and not hold the check or wait until the repair is completed. If the claim payment is included together most likely the mortgage company will place the funds for repairing the dwelling in escrow so they can give you the portion for your contents.
If they are not willing to sign the check giving you the contents portion you can ask your adjuster to void the check and write separate checks for the settlements. The contents check will be made out just to you and the dwelling coverage to both you and the mortgage company.
