Why Is My Insurance Claim Check Made Out to Me and My Mortgage Company?
Your mortgage company is a co-insured with you to protect their interest in collateral.
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When you buy a home with a mortgage, your lender has a security interest in the house. Lenders must protect the value of your home just as you would. When your home is damaged by a covered loss, your mortgage company is also a loss payee as a "co-insured" with you. Insurance companies issue claim checks in both your name and in the mortgage company's name. This feature enables your lender to ensure that these funds are used to make necessary repairs.
Loss Payees
Loss payees in insurance contracts are the parties to be paid in the event of a covered claim. When you buy a home using a mortgage loan, the lender is usually named as a loss payee along with you, the homeowner. Your lender has a lien (interest) on your property, evidenced by a recorded mortgage. As a loss payee, the lender protects their interest in your home, since a major loss would lower the value of their collateral.
Controlling Funds
In most cases, the homeowner receives the check, since they are the insured party. However, the homeowner must then endorse the check and send it to their mortgage company. Unless your lender considers it a very small claim, e.g., under $500 or per their internal policy, or if the loss is to your personal property, e.g., clothing or furniture, only, the lender will escrow (hold) the check, sending you amounts as necessary home repairs are made.
Home and Personal Property Loss
Should you suffer damage to both your home and your personal property, your mortgage company will usually send the amount of your personal property loss first, since they have no security interest in your clothing, furniture or other personal items. For large losses, you can ask your insurance company to issue two checks. You can ask that they send you one check for personal property claims and another for the loss on your home.
Warnings
Insurance companies sometimes send checks with the wording "full and final settlement" on them. Do not sign a check with this language, as it means the company is not liable for any further payout on your claim. Should you discover additional damage or loss, you will not receive the funds you are due. If your insurance company presents you with a "release" form, do not sign this document either. A signed release works the same way as a full and final settlement clause, eliminating company future liability to make additional payouts on your claim.