As a homeowner putting in a hurricane claim, you might be surprised to learn that the claim payout may not be fully in your control. If you have a mortgage, that may affect the payout process. Here’s how.
In most cases, if you have a mortgage on your home, then any checks from your insurance company for home repairs will be made out to both you and your lender. When you signed your mortgage agreement with the lender, you agreed that they would be named on the homeowners policy.
Why is this done? Your lender wants to be sure that any damages to the home get repaired correctly. Remember, you only own the portion of your home that is free and clear. Your lender owns the rest. They don’t want to lend money on a home that has damage.
By being on the insurance check, that means you cannot put the money into your personal account and forgo repairing the property. Instead, you will have to use the money as it was intended.
In some cases, you will not receive a check for the repair value. Instead, the money will go into an escrow fund supplied by your lender. They will release the money to the you and/or your contractor at specified times, paying for completed work after an inspection.
Will the Lender Get All of the Payout?
Your lender will not get any payout money that does not have to do with repairing your home. Here are a couple of examples:
- Additional Living Expenses (ALE): Living expenses incurred while waiting for your home to be repaired. These include lodging, food, and car rentals.
- Personal Belongings: Possessions inside your home. These include furniture, clothing, artwork, TVs, computers, and other items.
These payouts will go directly to you, even if you have a mortgage. You can use these checks to pay for your living expenses and buy new personal items.
Distributing the Claim
Every lender has their own process for distributing claim proceeds. There are several factors that determine if a lender will simply endorse an insurance proceeds check over to you. Some examples can depend on the check amount (all lenders have different threshold limits), the type of loan you have, the loan balance to debt ratio and/or whether or not your loan is in good standing.
Depending on the above, they may simply endorse the check over to you and allow you to begin making repairs. However, they may want to see documentation of completed repairs, so be sure to save any receipts and take photographic evidence as well. Or, they may also request to be notified when all work is completed so that they can conduct an inspection.
If a claim proceeds check is over the lender’s threshold, or for any other reason as determined by them, they may decide put the money into an escrow account. The money will then typically be paid in three payments or draws:
- Initial payment: Received shortly after the lender gets the payout amount from the insurer. This money is used to begin the repairs.
- Second payment: When the repairs are about halfway complete, the lender will release another check. This will go to the contractor and/or vendors to cover their costs.
- Final payment: This payment occurs after all repairs and inspections are complete. Typically, the lender will want documentation showing completed repairs. This includes receipts, photos, and inspection reports.
What Happens to Leftover Insurance Claim Money?
This depends on your lender, your insurance provider, and your specific policy. In most cases, however, you can keep the remaining money after all repairs have been completed. When do you have extra money? If you can find a contractor who can do the work at a lower cost or if you are licensed to do the work yourself, you can keep the remainder of the check.
In some cases, your lender will not allow you to take the excess money. Instead, they will apply the money toward your loan balance. Ask your lender what their policy is regarding surplus claim funds.
Settling a hurricane claim can be difficult due to the many factors that affect payout. If you have experienced hurricane damage, contact Aftermath Adjusters & Consulting. We can help you with your claim so that you receive a full payout quickly and easily. Call us today at (954)329-2456!