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Settling Your Claim

After a disaster damages a home or property, consumers often have a number of questions about their insurance coverage and what to do next. For additional questions regarding insurance coverage following a disaster, call the Consumer Services Center at 651-539-1600 or 800-657-3602 (Greater Minnesota only).

Working with with your mortgage servicer

Your mortgage servicer and insurance company will be your partners in rebuilding your home. First, contact your insurance company and as soon as the insurance process is underway, immediately contact the customer service center or claims center for your mortgage servicer. Most mortgage service companies have information ready with instructions regarding you insurance settlement check and how to manage the repair and reconstruction of your home.

If you have a mortgage on your home, the insurance settlement check will likely be written to both you and the holder of your mortgage (a bank or mortgage service company). This is because the lienholder has a right under the Uniform Commercial Code to protect its collateral (e.g. the house) and to make sure the insurance money is used to actually repair the property.

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.

Receiving your settlement

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 mortgage holder 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.

Setting up a payment plan

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.
  • Your spouse 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 to contact them to find out what assistance you are eligible for and the requirements for repaying any payments missed during the grace period.

Using your insurance settlement

You do not have to use your insurance settlement to pay off your mortgage and you should continue making your normal monthly payments. 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.

Resolving a dispute with your insurance company

Review the terms of your insurance coverage; policies are very specific and should indicate the specific perils covered. Be aware that even if fully insured for all perils, some losses will not be covered, such as:

  • Cost of tree and debris removal when structures unharmed.
  • Undamaged property, siding or shingles
  • Damage to property not involving structures

Contact the insurance company directly

If there is a disagreement about the claim settlement, ask the company for the specific language in the policy that is in question.

Do you and the insurance company interpret your policy differently? Ask for a written explanation detailing the reason for the denial and the specific policy language under which the claim is being denied. 

Don't rush into a settlement. If the first offer made by an insurance company does not meet your expectations, be prepared to negotiate to get a fair settlement.

Ask for an appraisal. Most policies have a clause that allows you to ask for an appraisal of the loss. You will be able to select an appraiser, the insurance company will select one, and a third will be mutually agreed upon. Together they will appraise the loss and decide on a value. Check your policy for details on this procedure.

How the Commerce Department can help

If you cannot resolve the dispute to your satisfaction, you can contact the Minnesota Department of Commerce’s Consumer Services Center to ask questions or file a complaint. Center staff work to resolve disputes between consumers and the insurance industry informally. Contact the Consumer Services Center by email at consumer.protection@state.mn.us or by phone (651) 539-1600 or 800-657-3602 (Greater Minnesota only).
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