How to Cash an Insurance Check Without the Mortgage Company

Having damage to your home can be stressful enough without having to deal with insurance checks and mortgage companies. Many homeowners have received an insurance check after filing a claim, only to find their mortgage company is also listed as the payee. This means you can’t cash the check without their permission.

While this may be frustrating, there are good reasons for including the mortgage company on insurance checks. The mortgage company has a financial interest in the home, so they want to make sure insurance money is used appropriately for repairs. However, as the homeowner, you may want more control over the funds.

Fortunately, there are several options for cashing an insurance check without going through the mortgage company. This guide will explain:

• Why the mortgage company is included on the check
• Your options for cashing it without their involvement
• Step-by-step instructions
• Potential issues and how to avoid them

Why Is the Mortgage Company on the Insurance Check?

When you take out a mortgage loan to purchase real estate, the lender takes a secured interest in the property. This means if you stop making payments, they can foreclose and take ownership of the home. It also gives them a vested interest in protecting their investment.

To protect the mortgage company’s financial stake, most homeowners insurance policies include a “mortgage clause.” This names the mortgage lender as an additional interest on the policy.

If you file a claim for property damage, this clause requires the insurance company to list your mortgage company as a payee on the check. This ensures funds are used to repair damages so the property value stays consistent.

Some common reasons the lender may be included are:

• The damage exceeds a set threshold: If repairs will cost over a certain amount, like $10,000, the lender may require dual payee status to oversee funds.

• You have an FHA loan: The Federal Housing Administration has guidelines requiring lenders be named on claim checks over $5,000.

• It’s in your mortgage terms: Your original loan documents may specify insurance proceeds must go to the lender first.

While having the mortgage company on the check provides protection, it can also limit your access to funds when you need to start repairs quickly.

How to Cash an Insurance Check Without the Mortgage Company

You have several options for cashing an insurance check without going through your mortgage company. Consider the pros and cons of each to decide what works best for your situation:

Contact the Insurance Company

The simplest solution is to contact your insurance provider and ask them to reissue the check in your name only. This avoids the lender’s approval requirements completely.

Before agreeing to change the payee, the insurer will likely request:

• A copy of your mortgage contract to verify the lender’s status
• Photos showing the damage and required repairs
• Estimates from contractors for repair costs

Provide all documentation the insurer needs to feel comfortable excluding the mortgage company. Keep in mind that the lender could still legally pursue a claim on the funds if not named on the check.

Pros

• Avoid lender approval process

Cons

• Mortgage company may file a claim against the funds
• Insurer may not agree to change check

Negotiate with the Mortgage Company

If the insurance company won’t reissue the check, you can try negotiating directly with your mortgage lender. This involves convincing them to endorse the original check so you can cash it.

Start by contacting their loss draft department and asking about their check release process. Provide repair estimates and offer to use a lender-approved contractor. You may also agree to higher oversight, like having a third-party inspector approve the completed work.

If the lender agrees, they will sign the check and return it to you, so you can cash it and pay for repairs. This option keeps the lender involved but avoids holding the money in escrow.

Pros

• Mortgage company endorses original check
• Avoid escrow and get funds faster

Cons

• Added oversight and approval requirements
• Need to negotiate with lender

Use a Separate Account

Another option is to deposit the insurance check into a bank account that’s completely separate from your mortgage. For example, you could open a checking account at a different bank and use it only for the insurance funds.

When you deposit the check, both you and the mortgage company will need to endorse it. But once it clears, you’ll have access to the money without lender oversight.

Just be sure to document how all funds are spent on repairs. If the lender audits the account activity, you’ll need to show the money went to approved uses.

Pros

• Access money without lender oversight
• Easier than changing check payee

Cons

• Need to open a separate account
• Documentation still required

Refinance Your Mortgage

If your goal is freeing up insurance money from the lender entirely, then refinancing your mortgage may help. When you refinance, you pay off your existing mortgage and replace it with a new loan.

Close the refi after the claim check is issued, but before cashing it. This removes the old lender from the equation, allowing you to deposit the check without their approval.

Just be aware refinancing costs money in origination fees and higher interest rates. Make sure the benefits outweigh these expenses.

Pros

• Eliminate lender oversight completely

Cons

• Refinancing is expensive
• Need good credit and equity for approval

Step-by-Step Instructions for Cashing the Check

Follow these steps to cash an insurance check without your mortgage company:

1. Contact your insurer – Call your insurance company and ask them to reissue the check in your name only. Provide any necessary proof to show repairs are needed.

2. Try negotiating – If the insurer won’t change the payee, contact your lender’s loss draft department to discuss approving the original check. Offer extra oversight if needed.

3. Use a separate account – Open a new checking account. Deposit the joint-payee check and use the funds solely for repairs.

4. Consider refinancing – Take out a new mortgage, eliminating the old lender from the equation prior to cashing the check.

5. Endorse the check – Once approved, sign the check endorsement as required to cash or deposit it.

6. Cash the check – Take the check to your bank or a check cashing service. Provide valid ID and cash the insurance check.

7. Make repairs – Pay your contractor and keep receipts for all repair expenses. Track spending to account for the funds if required.

Problems Cashing Checks Without a Mortgage Company

While possible to cash insurance checks on your own, it can lead to issues if you aren’t careful:

• The lender doesn’t approve – Without their endorsement, you can’t cash the check as a joint payee.

• Missing documentation – If you can’t provide the necessary paperwork, the insurer or lender may deny the request.

• Slow approval – Extra oversight leads to delays in getting funds for repairs.

• Misusing funds – Without tracking expenses, the lender could claim you misused the money.

• Check-cashing fees – Cashing without a bank account often means paying high fees.

• Check holds – Banks may place long holds on large insurance checks before allowing access to funds.

Tips for Avoiding Problems with Insurance Checks

You can avoid many of these headaches by taking the following preventative steps:

• Review your mortgage agreement and insurance policy to understand requirements before filing a claim.

• Contact both the insurer and lender quickly after receiving a joint check to start the approval process.

• Ask what documentation each company needs rather than waiting for them to request it.

• If using a separate account, set up online banking and detailed record-keeping to track expenses.

• Shop around local banks and check cashing services to find low fees for cashing the check.

• Deposit the check via a mobile app to avoid long in-person check holds.

• Consider mobile check cashing services like Ingo Money that pay funds immediately upon approval.

• Be patient and cooperative with both companies throughout the check approval process.

Is Cashing an Insurance Check Without the Mortgage Company Legal?

The short answer is yes, cashing an insurance check without your mortgage company is perfectly legal in most cases. The lender’s approval is more of an industry practice than an outright law.

That said, your specific mortgage terms may require their sign-off on insurance funds. And the lender could pursue legal action if they believe funds are misused or repairs weren’t adequate.

To avoid any conflicts, it’s best to get their endorsement in writing even if you deposit the money independently. If needed, request validation from your insurance company that only your signature is legally required.

Alternatives to Cashing Insurance Checks