If I'm Behind on a House Payment Will Insurance Still Pay a Claim to Me?

While most people who have a mortgage consider themselves homeowners, the truth is that until they pay off the debt, they are borrowers. Because the lender has a strong financial interest in the property, insurance payouts can be tricky situations. This is especially true for those who are not current on their monthly mortgage payments.

Insurances Claims and Missed Mortgage Payments

When an insurance company pays out a claim, they are paying both the borrower and the lender. In order to receive the funds, the lender most often has to endorse the check or hold it in an escrow account until the process has been completed. In the case of current payments, once the lender receives the insurance money, they will go through their own process of inspection and verifying before paying out directly to the borrower. This situation is complicated when a borrower is behind on payments. The lender typically has discretion as to payout, but in most cases borrowers can still receive their insurance claims if they are no more than three months behind.

Insurance Claims and Foreclosure

If a borrower falls more than three months behind on their mortgage payments, the lender may use the insurance money as part of the funds necessary in settling the debt and mitigating their loss. The exact process can vary depending on what specific foreclosure route is taken. Consulting with an attorney is the best bet in both cases to sort out who receives insurance claim funds.