Why is my Mortgage Company a Payee on my Insurance Check?

It is common for mortgage companies to be listed as payees on insurance claim checks in the event of property damage to a mortgaged property. This is because the mortgage company has a financial interest in the property and wants to ensure that repairs are made to the property to maintain its value. When you finance your home (or other property) standard mortgages include contractual language requiring that you carry specified types of insurance and also grants the mortgagee (the bank) certain rights in the coverage you have purchased and the claim payments you receive. 

If a policyholder is claiming additional living expenses or damage to personal property (which covers the loss or damage of items such as furniture or electronics), however, the mortgage company should not be listed as a payee on the claim check. This is because your additional living expenses (sometimes also referred to as “loss of use” damages) and/or personal property is not part of the property that the mortgage company has a financial interest in protecting. In the event that a policyholder receives an insurance check for any amounts that are not subject to the mortgage on the property but listing their mortgage company as a loss payee nonetheless in error, the policyholder should contact their insurance company (or claims adjuster) and demand reissuance of checks immediately (without including the mortgagee as a loss payee). If the insurance company sends a check that combines payments for both mortgaged and non-mortgaged items, the policyholder should demand that the insurance company send separate checks for those items and only include the mortgagee on the checks related to mortgaged property. 

Why is this important? Mortgage companies have specific requirements or procedures for handling insurance claim checks, and will require policyholders to follow those procedures before releasing the funds in a timely manner. Many times, the specific  requirements of the mortgage company for releasing insurance funds are, in practice, far more tedious than the language of the mortgage (the contract that grants the mortgagee limited rights to your insurance claim funds) actually allows. Mortgage companies notoriously overstep their limited authority to control your insurance funds and put policyholders in the position of, after fighting with their insurance company to receive the funds, fighting a second time against the bank for those same funds all over again. This creates additional time, and stress, between (a) when policyholders receive their insurance checks and (b) when the policyholder can ever effective deposit and utilize those funds for their unique needs of repairing their damaged property. 

Sometimes, sadly, it is even more difficult dealing with a mortgage company to attain release crucial insurance claim funds than it is dealing with the insurance companies to receive such funds in the first place. At Parrish Law, we understand the complexities of insurance claims, the relationships between policyholders and their mortgage companies, and are prepared to take action on behalf of our clients to get them the money they need for repairs – quickly and effectively. We can assist our clients in navigating these issues and ensuring that they receive the full benefits of their insurance coverage. If you have any questions or concerns about the role of your mortgage company in your insurance claim, please do not hesitate to contact us for assistance.