Can the lein holder take your claim check and decide how it is spent?

Free Insurance Quote Comparison

 Secured with SHA-256 Encryption

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Full Bio →

Written by

UPDATED: Oct 14, 2011

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

Insurance Question from Herreid, SD

Asked on 10/14/2011

Can the lein holder take your claim check and decide how it is spent? We are buying our home, we had to file a claim after a major hail storm. When we went to deposit the check the bank took the check and told us to have all the work done and then bring them the receipts and they would reembuise us! Any money left over would be put at the end of our payments!When we told them we had already made the arrangment with a contractor to provide the materials they told us they we had to pay it out of our pocket until the project is done. Of course we don't have $12,000 to make the repairs and we have rain water coming through the ceiling!

Answer given on October 14, 2011

When you have an insurance claim, the insurance company will include the lienhold on the check (your mortgage company).  This is because, the lienholder has an interest in the repair of the property which they are holding as collateral until you finish paying off the loan.  If by chance you foreclosure on the property and they get it back and have to sell it, they want it in the best condition possible in order to get the money they put out on the house.  Usually, they will refund to you any money left over.  However, if you are not current on your loan payments, they will keep the money left to make you current.  Normally, the mortgage company will want to see a copy of the adjuster report outlining the damage. They will then send an inspector to verify that the repairs have been completed and send you draws in accordance to the precentage of repairs completed (10% completed, 10% of the money).  Most mortgage companies understand that homeowners may not have the money upfront to make the repairs and will usually give you a percentage of the money to get the work started.  Put a statement in writing to the mortgage company advising them that you do not have the money to get the work started. Request a deposit amount that your contract needs (say $4,000) to get started.  They should be able to advance that money.  You will have to let them know when the contractor is finished and then they will send an inspector to verify.  Explain in the letter that you are unable to move forward and this delay is causing further damage to their collateral.  Make sure you send a copy of the letter to the president of the bank!  Hopefully, this will get things moving for you!           

IMPORTANT NOTICE: These answers are for general information purposes only and are provided by the person answering and AS IS. It has not necessarily been reviewed by the management staff of nor is it binding any insurance agent, broker, or other insurance professional or any attorney or insurance company. Insurance laws, regulations and practices vary from state to state and insurance policies and practices differ from company to company, by type of policy, by state and locality and by type of insurance. Tiny variations in the facts, policy language or a detail not set forth in a question often can change the outcome or a professional's conclusion. Although has confirmed that the answer(s) was/were provided for the account of an experienced insurance professional, that professional may not be licensed in the state referred to in the question, and may not be experienced or up to date in the subject area. Unlike the answers provided here, upon which you should NOT rely, for personal advice you can rely upon we suggest you consult a licensed insurance professional in your area or retain a licensed attorney listed on to represent you.

Free Insurance Quote Comparison

Enter your ZIP code below to compare cheap insurance rates.

 Secured with SHA-256 Encryption