Rebuilding After a Disaster

After a disaster damages a home or property, consumers often have a number of questions about their insurance coverage and what to do next. These frequently asked questions will help you sort through some of the major questions our Consumer Response Team (CRT) typically hears after a flood or storm. For additional questions regarding insurance coverage following a disaster, call the CRT at 651-296-2488 or 800-657-3602 (outside Twin Cities Metro area).

• I've settled with the insurance company, now what?
  
  

  As soon as the insurance process is underway, you should immediately contact the customer service center or claims center for your mortgage servicer. Most mortgage service companies have a packet of information ready with instructions on what to do with your insurance settlement check and how to manage the repair and reconstruction of your home.

   

• Why is my insurance settlement check written out to my mortgage servicer?
  
  

  If your damage was relatively minor and your insurance settlement is less than $10,000, the mortgage servicer will usually endorse the check and return it to you immediately.
  

  If you sustained major damage or a total loss, the mortgage servicer will normally release one third of your settlement check immediately so you can make a down payment with your contractor. As the construction process continues, the mortgage servicer will typically release another third of the money when the construction is 50% completed and the final third upon completion of the entire project. Because the servicer is responsible to the holder of the mortgage to return your property to its original value, they may require an inspection of the construction work (which they will pay for) before releasing all of the funds.

   

• My contractor says I should have the insurance settlement check written only to me to speed up the rebuilding process?

  This is unnecessary and impractical because your mortgage servicer has the right, under the Uniform Commercial Code, to protect its collateral and to make sure the insurance money is used to to restore the property to its original value.

  Most mortgage service companies have a very fast turn around time and will work with your contractor to begin construction as soon as possible.
  

  Most licensed contractors understand that the mortgage servicer will be included as a payee and most will work with their customers. To check if a contractor is licensed, visit Minnesota Department Labor and Industry License Lookup or call 800-342-5354.

   

• Do I have to use the insurance settlement to pay off my current mortgage?

  No. Your mortgage service company will keep your insurance settlement money in escrow and release it to you in installments so you can repair or rebuild your home. You are not required to pay off your current mortgage and should continue making your normal monthly payments.

   

• If my house is destroyed, am I still required to make mortgage payments?

  Even if your house is completely destroyed, the mortgage still exists. Most mortgage service companies will work with you to set up a payment plan, provide a grace period for late charges, and help in any way possible.
  

  Contact your mortgage servicer, inform them of your situation, and ask them to explain what assistance they offer. You may be eligible for a grace period if:
  

  • You have evidence that your ability to make payments has been affected because your place of employment or ability to work was affected by a disaster.

  • You're the spouse of someone who died, is missing, or was injured in the disaster.

  • Your property has been damaged or destroyed and is within a federally declared disaster area.

  During this grace period most mortgage servicers will waive late fees and stop any late payment collection activities. It's important you contact them to understand what assistance you are eligible for and the requirements for repaying any payments missed during the grace period.