How to Get Your Mortgage Company to Release Your Insurance Check

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  • How to Get Your Mortgage Company to Release Your Insurance Check

During the home insurance claims process, you’ll have to work with your mortgage provider to rebuild or repair your property. After all, you both invested in your home, so you both have an insurable interest in your property. 

Your mortgage lender wants to see your house rebuilt to recoup its investment. They often have some control of the money after the insurance company writes a check to cover repair costs. Learn how to get your mortgage company to release and cash the insurance check below.

How to Get Your Mortgage Company to Release Your Insurance Check

A mortgage lender may immediately release a check for a small claim. They may consider anything from a few thousand to $10,000 a small claim. But, for large claims and total losses, your mortgage lender will likely not release a check all at once.

With more significant claims, lenders have a common method of releasing the funds in thirds. They may release one-third of the funds upfront to get repairs started. Then, they’ll release another third when you’re about halfway through and the final third upon completion. Your lender will want oversight during the rebuild, and you’ll probably have to pass inspections, submit invoices, and stay in contact throughout the process.

Some major lenders may have online portals to submit documents and keep all communications in one place. To get the first payment released, you’ll likely need your:

  • Valid ID 
  • Mortgage number
  • Contractor estimates
  • Endorsed claims check

To get subsequent insurance funds released, you generally may need:

  • Contractor W-9s
  • Contractor licenses
  • Conditional waivers
  • Receipts, invoices, and other documents

You’ll need to be in touch with your mortgage company throughout the process. Procedures will vary by company and claim, so stay in contact with your lender to know what you need and when.

Why Is the Insurance Claim Check Made Out to You and Your Bank?

Many homeowners have a mortgage. When getting a mortgage, you’re required to put your lender as a loss payee on your homeowners insurance policy. This not only lets them know that you’re maintaining coverage at all times, but it also entitles them to the payment of a claim in the event of property damage.

When your insurer issues a claims check for property damage, they’ll probably make it out to you and your mortgage company. You should be the sole recipient of personal property and loss of use payments. But, checks for structural damage (relating to dwelling and other structures coverage in your plan) will be made out to you and your lender.

Your mortgage company may hold the funds and put them into an escrow account. You probably permitted them to do this when you signed your mortgage. They will manage the funds and dole them out as repairs are made. You must work with your lender to find contractors, builders, and more to rebuild your property and have the costs covered.

Note that if your house was completely destroyed, the lender might hold the funds to clear debris and pay off your mortgage before releasing the funds if you choose not to rebuild.

How Long Can a Mortgage Company Hold an Insurance Check?

An insurance company can typically hold mortgage checks for the duration of repairs. They often release them in installments as repairs are finished.

There isn’t a set amount of time a mortgage company can hold an insurance check. It depends on company procedures and how long repairs take. Contact your lender directly if you’re experiencing an issue with delayed funds. 

They should be able to clear it up. You may have missed a step in the process, such as submitting a contract or invoice. Also, ensure you have the right addresses in your paperwork to avoid miscommunication. 

How to Cash the Insurance Check With Your Mortgage Company

Your mortgage company needs to endorse the check before you can cash it. Most mortgage companies have procedures you must follow to ensure the funds will be used properly. 

When the insurance check is made out to both you and your lender, you need to endorse it first. If your claim is minor, the mortgage company may endorse it and give it back to you. If you have a large claim, your lender will likely endorse it and then put it in escrow. 

You’ll need to start your repairs to get the money out of escrow. Your mortgage company will release funds as you go along. Note that they don’t use the same escrow account you use to pay your insurance and taxes if you have an escrow account

An escrow account is just a third-party account that holds the money until a condition has been satisfied to trigger the release. In this case, the condition is the home repairs you make. To ensure you’re rebuilding your property, your lender may want contractor invoices, estimates, and more.

To avoid being unsure about any part of the process, you should read your mortgage and insurance policy. Know the guidelines and procedures. If you’re unsure, contact your lender and talk to someone. Also, you should stay on top of all communications your lender and insurer send, especially during the claims process.

Can You Cash the Insurance Check Without Your Mortgage Company?

No, you can’t cash a check from your insurance company made out to you and your mortgage company without your lender’s consent or knowledge. If this were possible, it would leave too much room for fraud.

There’s a reason insurance checks are made out to you and your mortgage company after an insurance claim. Both of you own your property, so you both get reimbursed for property damage. If the insurer writes large checks straight out to the policyholder at first, nothing is stopping them from taking the money and spending it on whatever they want without considering the lender’s right to the payout. 

You should work in conjunction with your lender to rebuild or repair your home after property damage, so there shouldn’t be a reason why you need to cash the insurance check without your mortgage company.

If you’re having issues, contact your mortgage lender. They may require some paperwork or documentation, like a builder contract, before releasing funds.

The Mortgage Company May Want an Inspection After an Insurance Claim

After an initial partial release of your insurance check to get reconstruction started, your mortgage company may want an inspection of the property to ensure repairs are appropriate before releasing more of the funds.

Exact procedures will vary by lender, but don’t be surprised if your mortgage company wants to inspect your property as repairs are underway. Generally, the larger the claim, the more oversight your lender might want to have.

After your mortgage company releases the first payment, which is often about a third of the settlement, to get repairs started, they may not release a second payment until about halfway through the process.

At this point, your lender may send an inspector to your property to make sure everything falls within the scope of the work you’ve agreed upon. They may take pictures of finished and unfinished work.

Then, once they see everything is good to go, they’ll release another portion of the funds. It may be more or less than another third, depending on the progress of repairs.

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The editorial content on Clovered’s website is meant to be informational material and should not be considered legal advice.