If you are going through a claim on your home you know it is quite a process. First the storm itself, then days without power, and debris everywhere. All this stress without coffee.
You clean up your yard, get your roof tarped and you are ready for your adjuster inspection..
The claim adjuster is inspects the damage, writes an estimate and hands you a check. You think the long process ends there. That is only the beginning.
The claims check is made payable to all parties listed on the insurance policy. That is all people and lienholders on the property. That leaves you standing there with stack of papers (the estimate) and a check made out to you and the mortgage company.
This may be very frustrating to you as the homeowner because you just want to get the repairs made. However the mortgage company is a named party on the policy. This is why when you get a loan you must provide your insurance information because the lienholder puts their name on the insurance policy.
There is also a clause put into the standard homeowners policy called the Mortgage clause. It usually found in the Conditions section and has verbiage similar to the following:
Mortgage Clause- The word “mortgagee” includes trustees.
If a mortgage is named in this policy, any loss payable under Coverage A(building items) shall be paid to the mortgagee and you, as the interest appear. If more than more mortgagee is named, the order of payment shall be the same as the order of precedence of the mortgages.
So as the homeowner there is no getting around this. Not to worry the mortgage company has the same goal you have, to protect the investment. They just want to be sure the repairs are made.
This clause was added the homeowners policy after Hurricane Andrew 1992. Mortgage companies were not always listed and many of the mortgage companies were left in a bind when the homes were leveled, the homeowner took all the insurance proceeds and defaulted on their loans. The banks lobbied to Congress and this clause became standard.