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When a House is Destroyed by Fire/Flood, How Does the Insurance Company Split the Claim Payment Between the Homeowner and the Bank?
Aug 02, 2020
After a Loss You and Your Mortgage Holder May Work Together
It is typical for a homeowners insurance policy's “Mortgage Clause” to spell out how losses will be paid when a bank has an interest in the property. A snippet from a ISO Homeowners HO-3 Policy form is below:
The basics are that the insurance company will write a check to you (the insured) and the mortgagee (bank). The parties involved can then work together to determine how best to repair or replace the home.
For small claims, the bank may have the funds distributed to an agreed-upon contractor.
For more significant claims, the bank may set up stages for the work that must be completed before earmarked funds are released. Inspections may be part of that process.
In rare cases where the home is not repaired or replaced, the bank will likely close out the mortgage, and split the proceeds accordingly.
Have more questions about your Homeowner’s Insurance? We love to help! Please feel welcome to call us at 607-324-7500 for assistance with all of your insurance needs.
For small claims, the bank may have the funds distributed to an agreed-upon contractor.
For more significant claims, the bank may set up stages for the work that must be completed before earmarked funds are released. Inspections may be part of that process.
In rare cases where the home is not repaired or replaced, the bank will likely close out the mortgage, and split the proceeds accordingly.
Have more questions about your Homeowner’s Insurance? We love to help! Please feel welcome to call us at 607-324-7500 for assistance with all of your insurance needs.
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