| One of the many things that policyholders don't think | | | | the name and address of your mortgage company. |
| about when they have a claim is the IRS tax | | | | They will issue the check jointly in your name and the |
| treatment of the settlement money. I'm not a tax | | | | name of the lender. They may send the check to |
| accountant, or any kind of accountant, so I'm not | | | | you. If they do, the lender will likely require you to |
| about to practice accounting or tax law here in this | | | | endorse the check and give the check to them. |
| article. But, the one thing I know that will help protect | | | | Then, they will set up a system of payments. To |
| you from the wrath of the IRS is to open a special | | | | find out more about that system of payments, |
| checking account which will only be used for your | | | | contact the Escrow Department of your Mortgage |
| insurance claim replacements and repairs. | | | | Company. Every lender is different. Find out what |
| Once the insurance company issues you the first | | | | your lender plans to do by contacting them and |
| check, go to your bank and open a separate account | | | | asking them. |
| just for handling claims issues. When you receive the | | | | The same procedure will likely apply when the |
| payments for the claim, deposit them in this account. | | | | insurance company issues checks for repairs to the |
| ONLY use this account for the expenses of the claim. | | | | dwelling (or even a settlement for a car wreck). |
| When the claim is completed, close the account. | | | | Anything you own that also has a lienholder or |
| Normally, when the insurance company issues | | | | mortgage holder will be issued jointly in the name of |
| advance payments against the ALE or Contents | | | | the owner and the name of the lienholder. If you |
| losses. the checks will be made payable just to you, | | | | own your dwelling or vehicle free and clear, the |
| because there's no mortgage on your contents. So, | | | | insurance company will issue your settlement check |
| those checks can be deposited directly into your | | | | only in the name of the owner. |
| claim account. | | | | ONLY USE THIS MONEY FOR THE CLAIM. Don't take |
| DO NOT DEPOSIT THE SETTLEMENT CHECKS IN | | | | a weekend vacation to Las Vegas with the money, |
| YOUR NORMAL CHECKING OR SAVINGS ACCOUNT. | | | | or buy yourself that new motorcycle you've always |
| Keeping a separate account for insurance claim | | | | wanted. However, there are circumstances in which |
| related expenditures makes it so much easier to | | | | you can use the money for whatever you like. You |
| keep good records. | | | | just won't collect all you should. Read Chapter 17, |
| When you ask for an advance against your Dwelling | | | | "Deduct This! |
| coverage, the insurance company will need to know | | | | |