Initial Insurance Distribution and the Original Loan

Regulatory Requirements & Scheduling

Initial Insurance Distribution: A summary

  • Early distribution of funds – 60 to 70% of the claim
  • Some claims take up to 6 months – Plan accordingly
  • Paying off the loan creates additional complications for your customer
    • Explore all the options to help your customer make an informed decision
    • Potential higher Interests rates
    • Having to get a construction loan

Initial Insurance Distribution: Details

The insurance company will often cut a large check very early in the process, often 60-70% of the claim. The difficult part is getting the last 10% of the claim from the insurance company. 

A few of the claims took 6 months AFTER we finished the home before we got the final payment. We always got paid in the end but plan your cash flow accordingly. 

When they receive the first initial payment, it may be helpful to tell your customer to NOT pay off their loan. We had a number of people think it was better to pay off their loan immediately. Then, only to learn they would now have to get a construction loan to rebuild AND often at a higher rate. Make sure they understand all of their options before deciding to pay off their loan. Especially now with higher interest rates, it is typically in their best interest to keep their old loan at the lower interest rate.