When you buy a home, your lender typically requires you to buy a homeowners insurance policy. That’s because they have a financial interest in the property and need to protect the value of the home.

So, if a fallen tree or tornado destroys your home, your insurance carrier may send a homeowners insurance claim check made out to you and your lender. This may surprise you and cause extra steps and stress in an already difficult situation.

But what happens if your lender is holding the check? Here’s the key to getting your mortgage company to release insurance proceeds.

Step 1: Contact Your Lender

The steps to get your mortgage lender to release insurance proceeds can vary by lender. The process can also depend on the claim check amount. For instance, some lenders have a different approach for claims above or below a specific dollar amount.

You may also have questions about your home insurance claim check. That’s why contacting the lender is the first step in getting your mortgage company to release the insurance proceeds.

Sometimes, a lender has an insurance claim check packet to use as a guide to accessing the money. If not, take notes on the process and ask questions to ensure you understand your next steps.

And make sure your lender knows where to find you. For example, if your home is uninhabitable, you may have a temporary address and telephone number. Give your lender your contact information to prevent communication delays.

Step 2: Find Out If Payment Is a Lump Sum or Installments

A property insurance claim payout isn’t typically a “one and done” situation. Unless the damage claims are small, you’ll likely receive multiple checks.

The initial insurance payment isn’t final. Instead, it’s usually an advance against the total settlement amount. 

The adjuster may need more time to inspect the home to determine the full extent of the damage. Getting an initial payment can help get the ball rolling on necessary repairs.

Keep in mind that lenders can become more involved with the rebuilding process for larger claims. Your lender may set up an escrow account to deposit the proceeds into. As contractor estimates are received and rebuilding takes place, the lender can release the funds in installments.

Step 3: Submit Required Documents

Your lender may require you to submit documentation before sending you any insurance money. For instance, your mortgage lender will likely need:

  • The insurance adjuster’s report
  • Contractor estimates
  • A repair affidavit

 A repair affidavit is like a promise you make to the lender that you’ll restore the house to its condition prior to the damage. 

However, it is a legal document. You may want to contact a real estate attorney for legal advice. The attorney can review the affidavit and explain the potential impact before you sign it.

Your lender may have an online portal where you can upload the documents. Otherwise, you may want to deliver them to a local branch or send them by fax or mail.

Step 4: Facilitate Repair Inspections

Inspections are often part of the rebuilding process. How many inspections you need can depend on the amount of damage your home suffered. 

To speed up the process, try to facilitate the inspections as best you can. Here’s how:

  • Check on repair progress regularly.
  • Arrange to be present during inspections.
  • If issues are discovered, discuss a timeline for their resolution.
  • Attend any additional inspections.

Following up on any issues that come up is crucial. Besides requiring ongoing assessments to follow the repair progress, the lender may also need to approve the inspection report before releasing the next installment of insurance proceeds

Any delay could push back the timeline of when you can return to your home.

Step 5: Request a Final Inspection to Receive the Final Payment

The mortgage lender often has control over when to release the final payment. Whether the funds are going to you or to the contractor, you won’t want to postpone the final payment.

However, you can’t have a final inspection until all repair work has been completed or is near completion. 

When your home is nearing the final stages of repair, contact your lender to schedule a final inspection. Try to arrange to be there, even if your lender doesn’t require it. 

If you’re there, you can address any issues that may come up and establish a timeline to resolve the problems.

The lender will issue a check for the remaining balance after an inspector verifies that the repairs are complete.

Frequently Asked Questions

Who gets the home insurance claim payout if my home has a mortgage?

Both you and your lender. Because your lender has a lien on your property, the lender is usually named as a “loss payee.” As a loss payee, the lender can protect their financial interest in the home by having their name included on the check for insurance proceeds. You may receive the check, but your mortgage contract can require that you send it to your mortgage company.

Can my mortgage company hold my insurance claim check?

Yes. Your mortgage company has a financial interest in making sure the necessary repairs are done. The lender will often keep the insurance check and release funds in installments as repair progresses. Once the home is restored to its original condition, the lender can send a check for the final amount.

How quickly can I get my mortgage company to release my insurance check?

It depends. Lenders have different processes in place to manage insurance claims. Your best option is to contact your mortgage lender. You may discover the lender has a step-by-step guide to minimize delays in getting you the claim funds.

Can I have my funds mailed to a different address?

Yes. In some cases, your home may be uninhabitable following a loss. Give your lender the address and phone number where you’re temporarily staying while repairs are being made. Before the lender releases the funds, make sure they have your correct address on file to avoid delays in receiving the check.

Making Mortgage Companies Work with You

Insurance companies commonly include the lending company’s name on insurance claim checks. Adding your mortgage holder’s name to the insurance check allows them to make sure the funds are used to pay for the cost of repairs

Usually, insurance funds flow smoothly from insurer to lender to policyholder. But delays can happen. If you’re having trouble getting your mortgage company to release insurance claim proceeds, contact the lender to ask about the process.

And remember: It makes little sense for the lender to hold onto the funds. Doing so could delay repairs, leading to further property damage. However, working through the process can require you to be patient and persistent. And if you are curious about how to compare home insurance for generally, consider learning more with Insurify.

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Updated June 24, 2021

Amy is a content marketing writer who specializes in personal finance and technology. With a background in the legal field, she has a talent for transforming complex topics into content that’s easy to understand. When she’s not writing, she enjoys reading and playing board games with her family. You can learn more at amybeardsley.com.