Insurance check

[Kkhora]

Jurisdiction

Iowa

I had water damage to my home. The insurance company has cut me a check but included the mortgage company. The mortgage company informed me that once the repairs are completed the money left over (work will be completed under budget as I am doing work myself) will be applied to my mortgage and not returned to me. They said to access that money I would need to use a home equity loan. My name is on the check with theirs. I am current on my mortgage payments. Is this legal as I would then have to pay the mortgage company interest to access money that should be returned to me. I am doing work myself to save money in order to complete additional repairs on the home.

 

[army judge]

You answered your own question.

You've done your homework and spoken to the insurance claims adjuster and customer service.

If you're unstatisfied, off to mediation or arbitration you must go, only to have what you've been told reaffirmed.

This isn't an issue of legality, it's a creature of contract law.

 

[hrforme]

Insurance is not meant to help you profit off of a claim. Even if you do the work yourself. Insurance is meant to keep your property "whole" to both you and the lender/mortgage company. And don't be surprised if the lender sends out an inspector to inspect your work to prove that the damage was fixed to their specifications. The extra money is not meant for additional repairs that you want to do on your home.

 

[adjusterjack]

The mortgage company informed me that once the repairs are completed the money left over will be applied to my mortgage and not returned to me.

That the insurance company issued the check to you and the mortgage company complies with the lenders loss payable provision (also known as mortgage clause) of the policy.

However, whether it's proper for the lender to apply the excess to the loan balance depends on the terms and conditions of your mortgage loan contract. I suggest you take it out and read it, the part where it explains what happens with insurance claim checks.

 

[zddoodah]

Is this legal

Yes.

I would then have to pay the mortgage company interest to access money that should be returned to me.

The money most certainly should not be returned to you. You're entitled to have the damage repaired and the home returned to the same condition as before the damage occurred. Nothing more.

 

[adjusterjack]

The money most certainly should not be returned to you

But could be, depending on the terms and conditions of the loan contract.

I had an $8000 claim once. After doing all the repairs for $5000 my mortgage company sent me back the rest of the money which I cheerfully pocketed.

Not saying it will happen but it could.