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A loss draft is a payment (usually by check) for losses due to damages or destruction of insured property.
The cause for such losses are usually due to natural disasters.
Also referred to as a claim check, such insurance payouts are made to two beneficiaries.
The homeowner (mortgager) and the lender (mortgagee).
In order to assess the amount of damage on property to determine the amount of claims to pay, property inspectors would assess the property to estimate the losses incurred.
When the losses are due to damage to property, quotes or contracts from contractors might be required when submission for claims is made.
To prevent abuse of such policies, when the loss draft is over $10,000, disbursement of funds can be more stringent and involve the use of an escrow account.
This is called a monitored claim. While those below $10,000 are called non-monitored claims.
Documents to prepare for cashing in include:
- Insurance Adjuster’s Report
- Contracts for repair
- A declaration of intent to complete repairs
And different banks might have different policies, one should check the requirements of their particular bank when preparing submission documents.