Key Takeaways
This post is a 4 minute read.
With a mortgage, the company that holds your loan is usually named on the claim check next to you.
Larger claims are often paid out in stages as repairs are finished.
Many Alabama policies use a separate wind and hail deductible that is a percentage of your coverage.
A claim does not pause your mortgage payment.
Call your loan servicer early and keep every photo, bid, and receipt.
A hailstorm crosses Tallapoosa County on a Tuesday and strips shingles off your roof. A few weeks later, the insurance check arrives. It has your name on it, and the name of a company you only know from your monthly bill.
Many homeowners freeze at that moment. This post explains what is going on and what to do next.
Why Your Mortgage Company Is on the Check
Your home secures your loan. If the house is damaged, the value behind that loan drops. So your policy lists the mortgage company as a "mortgagee." That just means it has a financial stake in the house.
For damage to the structure, the insurer usually writes the check to both of you. Both names must sign the back before it can be cashed. This protects the repairs from being skipped.
Payments for belongings and temporary living costs are often handled separately. Those checks commonly go to you alone. Your claim letter will show which is which.
Meet Your Loan Servicer
The servicer is the company that collects your payment and manages your loan. It may not be the company you met at closing. Loans are often sold or transferred after they close.
Your servicer will usually have a team that handles insurance claim checks. These funds are often called a "loss draft." Call the number on your mortgage statement and ask for that team.
How the Money Gets Released
Rules vary by loan and by who owns it. Fannie Mae's servicing guide gives one example for loans that are current when the damage happens.
The servicer may release the greater of $40,000 or 33 percent of the proceeds up front. The rest is paid as repairs move along. Loans that are already behind on payments face stricter, slower steps.
Many servicers ask for a signed contractor bid before they release money. Some will inspect the work, or accept photos and video, before paying the next installment. Undisbursed funds are typically held until the work is done.
Your servicer may follow different rules. Ask for its steps in writing so you know what to expect.
Wind and Hail Deductibles in Alabama
Alabama storms are a common reason for claims. Many policies here have a separate wind and hail deductible. It is often a percentage of your dwelling coverage, commonly 1 to 5 percent, instead of a flat dollar amount.
Here is how that adds up. On a $300,000 dwelling limit, a 1 percent deductible is $3,000. A 5 percent deductible is $15,000. That is money you pay before the insurer pays anything.
Roofs add another wrinkle. A replacement cost policy pays to replace the roof, often in two parts. An actual cash value policy pays the depreciated amount. Older roofs may only qualify for the second kind.
Read your declarations page before a storm hits. Wiregrass buyers who lived through Hurricane Michael learned this lesson the hard way.
Your First Week After Damage
Take photos and video of everything before you move anything. Then do what is reasonable to stop more damage, like a tarp over a hole. Keep the receipts.
File the claim quickly. Your policy sets the deadline, so do not wait. Then call your servicer and tell them a claim is open.
Get written bids from licensed contractors. Ask your servicer before you sign a check over to anyone. Doing it out of order can delay your funds.
How a Claim Can Touch Your Payment
Your mortgage payment is due as usual while repairs happen. A claim does not pause the loan. Missing payments can also slow the release of repair funds.
If your insurance premium changes at renewal, your escrow account may adjust at the next yearly review. That can raise your monthly payment. A heads-up call to your servicer helps you plan.
Insurance Claim and Mortgage FAQ
Why is my mortgage company on my insurance check?
The home secures the loan, so the lender is listed on the policy. The insurer usually names both of you on checks for structural damage.
What is a loss draft?
It is the term for insurance money that a servicer holds and releases for repairs. Funds are often paid in stages as the work is finished.
Can I just cash the check and hire a contractor?
Not without the servicer's signature when its name is on the check. Call first and ask how to endorse it.
Do I still owe my mortgage payment during repairs?
Yes. The loan stays active. Keep paying on time while the claim and repairs move forward.
What is a percentage wind and hail deductible?
It is a deductible set as a share of your dwelling coverage, such as 1 to 5 percent. Check your declarations page for your exact amount.
Own a home or planning to buy one? Reach out to Breeze Mortgage for a simple, stress-free look at your home financing options.
Trey Foshee, Mortgage Loan Originator, NMLS #2654005 | Hunter McBride, Mortgage Loan Originator, NMLS #2674392 | Joe Taunton, Mortgage Loan Originator, NMLS #953010
Breeze Mortgage is powered by Edge Home Finance, LLC | NMLS #891464 | www.nmlsconsumeraccess.org. Edge Home Finance, LLC is a mortgage broker, not a direct lender or creditor. Licensed in 49 states and D.C. (Not licensed in NY). Edge Home Finance, LLC does not arrange, solicit, or originate mortgage loans for real property located in the State of New York. Equal Housing Opportunity. This content is for informational purposes only and is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines, and property eligibility requirements. Down payment assistance programs, availability, eligibility requirements, and funding are subject to change without notice. Contact Breeze Mortgage for current program details and to determine what options may be available for your specific situation.
