What should I do when I receive a home insurance settlement?

When your settlement is paid, the check will probably be made out to both you and your mortgage servicer. Most mortgage agreements require this.

Your insurance settlement is to rebuild your home. So the amount may be more or less than what you owe on your loan.

Keep in mind that the market value of your home may not match the insured replacement value. That’s because, in some locations, the materials and labor that go into rebuilding your home may be less than the overall value of your property – its location, desirability and other things that go into housing prices. There are also special laws in various states addressing what happens if your home was insured for less than its replacement value. Your state Department of Insurance or Insurance Commissioner may have useful information. You may also need the advice of a lawyer if your claim is large.

Typically, your mortgage servicer will release a portion of the settlement money before work begins so you can hire a contractor. When the work is halfway finished, the servicer will typically release more money. The rest will be released once the job is finished and the home passes inspection.

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