What the Mortgage Clause Means for You

The mortgage clause is a standard provision in virtually every homeowner policy. It protects the lender's investment in your property but also affects how claim payments are handled.

• Your mortgage company is listed as a loss payee on your insurance policy
• Claim checks for dwelling damage (structure) are made payable to both you and your lender
• Claim checks for personal property are made payable to you alone
• Your lender may require you to endorse the check and then they deposit and disburse the funds as repairs are completed
• Some lenders release the full amount after verifying you have a contractor's estimate; others release funds in installments

How Claim Payments Flow With a Mortgage

Understanding how the money flows helps you plan for the repair process. Here is what typically happens after a claim is approved.

• The insurance company issues a joint check payable to you and your lender
• You endorse the check and send it to your mortgage servicer's insurance claims department
• The lender holds the funds in a special account or disburses them as repairs are completed
• You typically need to provide invoices and photos of completed work to get the next installment released
• Once all repairs are completed, the lender releases any remaining funds to you or applies them to your loan principal

What Has a Mortgage and What Does Not

Not every part of your claim is subject to the mortgage clause. Understanding the split helps you know what to expect.

• Dwelling coverage (Coverage A): Subject to mortgage clause. Joint check with lender.
• Other structures (Coverage B): Subject to mortgage clause if you have a mortgage on the property.
• Personal property (Coverage C): Paid directly to you. No lender involvement.
• Loss of use (Coverage D): Paid directly to you for temporary housing and living expenses.
• Liability (Coverage E): Paid to the third party or their legal representative, not to you or the lender.