How to Protect Your Sandy Insurance Check

If you had damage from Hurricane Sandy and filed claims with your insurance company you may be finally receiving the needed money now.  Be careful because if you are in debt or behind on your mortgage you may not see that money.  Check out some possible scenarios of how your insurance money can be taken, without your ability to do anything about it, to pay off other things.

Note that although you are the policy holder, your insurance company will likely send the check in your name AND the bank’s name. This is done for the purpose of insuring that the funds are used to rebuild the structure and so the bank has their interest protected. Many times too, the check is not given to you but given directly to your bank.  The bank can then hold on to that check and use it for things other than your hurricane damages like arrears on your mortgage.  So be aware and check with the bank to insure the proceeds will be paid out to your contractors.

Beware of depositing large sums of money into your bank account if you are in debt.  While FEMA money is usually safe from your creditors, insurance money is not! Insurance money is not necessarily exempt from garnishment from creditors and if you owe money or have been sued, your bank account can be restrained. You will not get warning of this and once it happens releasing the funds could take weeks if at all.

Advice
If you are expecting to receive money from your insurance company, make sure you do not owe anyone money since the funds could be lost. Take this scenario of a recent Sandy victim. She is behind on her mortgage and her house is damaged. She has no electricity, heat or hot water. She received an insurance check made out to her and her bank. Upon speaking with the bank to get the funds released the bank said, oh we are not releasing those funds for repair. Those funds will go to the money owed to the bank first. She came to me to ask is this legal and unfortunately it is. So before you sign a contract for repair on your home, be sure you are really getting those funds. Try to resolve debts and other issues so the funds will not be held up in any way, or you too could be facing the decision to abandon your property.