Can A Mortgage Company Keep Your Insurance Check?

Find out how to get your Mortgage Company to release your Insurance check.

In today’s real estate landscape, purchasing a home involves obtaining a mortgage, a practical choice considering the substantial financial commitment required. Even for those fortunate enough to have significant cash reserves, opting for a mortgage is often a strategic move, allowing available funds to be allocated towards unforeseen expenses that may arise. The dynamics shift significantly when a house is acquired with a mortgage, leading to a unique scenario where insurance companies regard both the homeowner and the mortgage lender as equal co-insurers.

This parity stems from the lender’s financial stake in the property, a crucial element that insurance providers duly recognize and safeguard. Your beautiful home has fallen victim to a natural disaster, such as a devastating flood. Swiftly, you document the extent of the damage, capturing detailed images and assembling pertinent paperwork. Subsequently, your insurance company issues a compensation check in your name jointly with your mortgage company. The rationale behind this joint issuance lies in the shared financial interest that your lender holds in your property.

The journey forward can take two routes, contingent upon the seamless coordination with your mortgage lender. Ideally, you’d collaborate harmoniously, expediting the process of cashing out the insurance check and commencing the essential repairs. However, the path can veer off course, leading to potential complications and roadblocks that may pose a considerable hassle. Can a mortgage company retain your insurance check, delaying your ability to restore your cherished home?

To delve into this intricate subject, we’ll navigate the nuances of insurance claim procedures, the significance of your mortgage agreement, and the potential scenarios that might transpire if your mortgage company is reluctant to endorse the insurance check promptly. Along the way, we’ll equip you with insightful strategies to navigate this terrain effectively, ensuring you have the tools to secure control over your insurance funds, expedite recovery, and surmount any obstacles.

As we delve deeper, we’ll solve the mechanisms that govern insurance claim disbursements, shed light on the essential role played by your mortgage lender, and provide actionable insights to empower you in taking charge of your insurance proceeds swiftly and efficiently.

How long does an Insurance Claim Check take?

Every state has a different claim process. Usually, it takes 10-30 days to acknowledge the claim and then 40 days to accept or deny it. This 40 days situation is generally in California, where companies may also give additional time if a policyholder wishes. Once they get the claim, the money should be given out within 30 days of accepting it.

In Kansas, even though there isn’t a recommended date of when the claim must be paid, it usually takes around 45 days to investigate the claim. And 30 days to accept it.

Image Source: Performance Adjusting
Image Source: Performance Adjusting

In Missouri, insurers usually give ten days to policyholders to accept or deny the claim, then notify them, and then 45 days to cash it.

The mortgage company, however, should release the check within ten days of receiving it. But that’s when everything’s good in an alternate, authentic world; that rarely happens. And we’ll discuss ‘why’ later in this article.

How long does a settlement check take?

A settlement check is basically what your attorney will give you after all the legal fee has been cleared. Usually, a settlement check takes six weeks to get removed and off the table. Within this duration, you must take action: gather up the money and pay for damage repairs. Your lawyer will ideally handle a settlement check from the insurance company, so ask them about any questions or concerns you may have, and they will guide you better.

How do you cash a check with the mortgage company’s name on it?

The easiest way is to have the company on board with you. Even if they have held your check, the best way is to coordinate with them about the situation openly. Most lenders can save your check and insurance claims while renovating or repairing your house. But the check needs to be endorsed for it to be cashed out. With hard cash in your hands, you can pay for any repairs.

What is check endorsement, and how does it work?

Check endorsement is a simple yet critical process. It is proof of any change in the policy, and the insurance company has to take care of it. Since the mortgage company is also equally in on this, the check needs to be endorsed by them. If the review is in your mortgage company’s name, you can’t walk into the bank and have it cashed out because your name isn’t there. Usually, a repairs check made out for more than $10,000 will need the endorsement of your mortgage company; if it is anything less, it wouldn’t require approval. It is why insurance claim check cashing has a little technicality that you need to get ahead of.

Image Source: Investopedia
Image Source: Investopedia

If the check from the insurance company needs endorsement, you have to call your mortgage company and contact their ‘loss draft department.’ Now that that’s done, what’s next? They will send you a packet that requires all essential documents and information they will need from you, such as proof of the contract AND the damage done to your house; ideally, when you do that, the check is quickly endorsed, and you’re good to go. You cash out the bill and pay for damages. Not every little detail and information you’ve encountered after the mortgage signing. Contact relevant people and use those contacts to build your case.

Unlocking your mortgage company’s release of insurance proceeds: A step-by-step guide

Getting your mortgage company to release insurance proceeds after your home has suffered damage or destruction requires a strategic approach to navigate the complexities of the process. Here’s a step-by-step guide to help you efficiently secure the funds you need for repairs and restoration:

 Image Source: Virani law
Image Source: Virani law

Step 1: Contact your lender

The initial step in the process is to establish communication with your mortgage lender. Since procedures can vary based on the lender and the claim check amount, reaching out to them is essential. Some lenders might have specific protocols for different claim amounts, so clarifying the process early on is crucial. If your lender provides an insurance claim check packet, use it as a guide. If not, make thorough notes during your conversation, and feel free to explain anything with inquiries. Keeping your lender’s contact information current and correct is essential, mainly if your property is uninhabitable.

Step 2: Determine payment structure understanding

The nature of the insurance payment is vital. Generally, insurance payouts for property damage aren’t a one-time disbursement. The initial price you receive is often an advance against the total settlement. The lender may establish an escrow account for more substantial claims, such as significant property damage. This account holds the funds released in installments as repairs progress. Remember that the lender may be more active in more significant claims.

Step 3: Submit the required documentation

Your mortgage lender will likely require specific documents before releasing any insurance funds.

These may include:

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

A repair affidavit is a commitment to restore the property to its pre-damage condition. While it’s a crucial step, it’s also a legal document. Consult a real estate attorney to ensure you fully understand its implications before signing. Many lenders offer online portals for document submissions, but you can also deliver documents to a local branch or send them via fax or mail.

Step 4: Facilitate repair inspections

The rebuilding process often involves inspections to assess the progress and quality of repairs. To streamline this process:

  • Regularly check on repair progress.
  • Coordinate your presence during inspections.
  • Address any issues promptly and establish resolution timelines.
  • Attend all necessary reviews.

Timely follow-up and addressing issues are vital, as the lender may need to approve inspection reports before releasing further funds. Delays can impact the overall timeline of repairs.

Step 5: Request a final inspection

As your home nears completion of repairs, contact your lender to schedule a final inspection. Being present during this inspection is recommended, as you can address any concerns and discuss potential solutions. The lender will issue the final payment once the inspector verifies that all repairs are complete and meet the required standards. By diligently following these steps and maintaining effective communication with your mortgage lender, you can navigate the process of releasing insurance proceeds and expedite the restoration of your home.


4Image Source: Search Engine Journal
Image Source: Search Engine Journal

Why can’t I deposit and use my insurance checks? Why does it have to go through my mortgage company when I paid the insurance premiums first?

Your mortgage agreement ensures your mortgage company’s financial interest is protected in case of property damage. They must co-insure to prevent misuse of insurance funds. Checks are jointly payable to prevent misappropriation.

Will the mortgage company be co-insured on only the coverage of checks?

They may also be named on checks for other property aspects. Assume the mortgage company’s involvement in anything tied to your property’s value.

Does the lender keep more money than I still owe them on my mortgage if the insurance checks total exceeds my mortgage?

They shouldn’t, though. Mortgage companies typically hold funds up to the loan balance. Some have written policies specifying this limit.

Why does the company need such a policy if it is already part of the mortgage?

Mortgage companies’ loss departments may need to understand mortgage terms fully. Written policies reinforce fund handling limits.

Will the mortgage company pay me interest on their insurance proceeds?

Potentially, but it often requires negotiation. California law may entitle you to 2% interest on insurance proceeds. Legal battles are uncharted territory.

What is another approach to ensuring I receive interest on the insurance payments?

Argue that interest-bearing account deposits mean interest belongs to you. Some have successfully negotiated interest by challenging mortgage practices.

How quickly can I get the lender to release the insurance checks?

The process may be slower than desired. Progress payments are standard, often 1/3 upfront, 1/3 at 50% completion, and 1/3 upon full completion.

Can I deposit the insurance check directly into my account?

Typically, no. The check is often payable to you and the mortgage company to ensure proper fund usage.

What if my insurance check is for more than my mortgage balance?

Mortgage companies generally only hold funds up to the loan amount. Excess funds should be released to you.

Can I negotiate with my mortgage company for faster access to funds?

Yes, you can communicate with your mortgage company to expedite the release of funds for rebuilding. Progress payments are expected.

Will my mortgage company pay me interest on the held funds?

It’s possible, but you may need to negotiate for interest payment. California law may entitle you to interest on insurance proceeds.

Can the mortgage company use the insurance funds to pay off my mortgage?

No, using insurance funds for mortgage payoff without consent could breach good faith practices and have legal implications.


Yes, the mortgage company can keep your insurance check because they are also listed as co-insurers. And they can hold it until the process isn’t settled.

Usually, it gets settled before legal entities intervene, and things get normal before you even file a claim. But if you do, ensure you have all your documentation, application forms, and dates. It will help you build a stronger case against your mortgage company IF they hold your check and refuse to release it.

To avoid all this hassle, call up your mortgage company or your lender and explain the whole situation to you when your house is damaged. Before they even discuss the insurance check, ensure you are on the same page. And when the insurance company gives you a review, the mortgage company endorses it so you can cash it out to pay for repairs.

The process sounds easy but could have many complications if any entity isn’t on board. So you need to be the bridge between this situation and handle it professionally.

Tony Bennett

Tony Bennett

Tony Benett makes his living in the insurance industry by teaching and consulting. He is also recognized by the legal profession as an expert on insurance coverages. His insurance experience includes having worked at the company level, owned an independent general agency and having worked for an insurance association. He has received various certificates over the past few years and helps his clients and readers by giving them a realistic outlook on what they can expect to achieve within their set targets. At Insurance Noon, he is known for his in-depth analysis and attention to details with accuracy. He has been published as one of the most referred agents by his peers in the insurance community. Tony loves the outdoors and most sport events. His passion other than providing excellent advice is playing golf.

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