Insurance

escrows

When your home is destroyed and you have a mortgage, your Coverage A payout doesn’t always land directly in your hands.

The check is often made out to both you and your mortgage company.

Though annoying, this can also be a good thing. 

*This information has been checked for accuracy and non-bias 
by licensed professionals, experts and representatives from 
National 501c3’s. Consult with a licensed professional about your specific situation.

Why the Mortgage Company is Involved

  • If you still owe money on your home, the mortgage company has a financial stake in the property.

  • Insurance payouts protect their investment, too, so the mortgage company wants oversight on how the money is used to repair or rebuild, so they hold the funds in an account set aside for rebuilding costs.

  • If your mortgage lender is listed on your insurance policy, they may require that your dwelling coverage be released to an escrow account that they oversee with you.

Note: Personal property and ALE funds are generally paid directly to the homeowner, not the mortgage lender. 

What you should do: If your insurer has notified you that payments will be made to both you and your lender, call your mortgage lender and ask them to walk you through their insurance claim checkprocess; every lender will have their own protocol.

What Happens Next


  1. You may get a physical check with both your name and the mortgage lender as beneficiaries, or the insurance company may deposit directly into an escrow account created by your lender. 

  2. Your rebuild funds will likely be released in pieces, not all at once.

  3. The lender typically requires proof that work is being done (like contractor bids, permits, or inspection reports) before releasing each installment.

How the Money Gets

Released

  • First draw: You may get an initial chunk to start repairs. 

  • Progress draws: Additional funds are released as the work moves forward and inspectors confirm progress. Each draw release can take up to several weeks, depending on lender inspections, paperwork reviews, etc. Staying in regular contact with your lender’s Loss Draft Department to avoid delays is advisable.

Final draw: The last payment is released once the rebuild or repairs are complete.

Why This Can Be A Good Thing:

Having an escrow account can actually protect you from contractor mismanagement and fraud. Because they can only be paid once work is completed, and it’s out of your control, they are forced to deliver on the contract. We’ll walk you through this more in depth as it becomes more timely.

Pro TIP:

  • Ask your lender whether this money can be placed in an escrow account that earns interest, and if that interest can be credited to you

  • Keep copies of every document, receipt, and inspection report.

  • Stay proactive: Delays often come from missing paperwork or unclear communication.