We had an adjuster come in the other day, mostly for an update on a large number of water damage claims we are working on after our storm last week. During the conversation he brought up a good point about lenders and insurance policies.
Most of the time you are required to list a lender on a policy for things you borrow money to buy. Whether it is a car, boat, house, business or equipment whoever loans you the money will typically ask to be named on your insurance in case there is a loss to that property. They do this because they want to be able to recover the remaining amount on the loan In the event of a claim.
Once coverage is confirmed and a check is issued it is typically made payable to you as the insured and the lender as a lienholder. This protects both parties - the lender signs off when arrangements are made to satisfy your debt and then you sign off to make reparations/replacement after that.
Here is the snag. If a Lienholder/Mortgagee is listed on your policy and there is a claim check issued, the company is required to name both parties on the check whether or not the borrower/lender relationship still exists. If you pay off your loan or mortgage the lender does not contact us. You have to contact us. If we do not know about it and don't remove them from your policy - you could end up with a lender's name on your check you have not dealt with for a long time and, frankly, the lender may have been sold to someone else since you paid it off. You cannot cash your check without them signing off and you may not even know who "they" are anymore.
So, if you have paid something off, let your agent or company know! When you get your insurance, read through it completely and see if someone is listed who should not be on your policy. It may save you a major headache later!
By Lori Madison