What to do after property damage: the step most homeowners miss

Many homeowners assume the process is simple: File a claim, get an insurance check, hire a contractor and move on.

But there is an important step that often gets missed. Skipping it can delay repairs, create financial complications or even put you at risk of fraud.

If you have an outstanding mortgage, the next step after receiving an insurance check is not starting repairs: It is contacting your financial institution.

Here is how the process actually works and how to protect your home, your loan and your peace of mind.

Step one: Start with your insurance company

After property damage, contacting your insurance provider is the right first move. They will assess the damage, determine coverage and issue payment for covered repairs.

In many cases, the insurance check will be made payable to you and your lender. That is not an error. It is a safeguard.

When you have a loan on your home, your lender has a financial interest in making sure the property is restored properly. The home secures the loan, and repairs help protect that investment for both of you.

Step two: Before repairs begin, contact your lender

Once you receive the insurance check, the next step is to contact your financial institution’s loss draft department, not a contractor.

At Westerra Credit Union, our Loss Draft Department helps members navigate this process. The goal is not to slow things down. The goal is to make sure that:

• Repairs are completed as intended

• Insurance funds are used appropriately

• Contractors are legitimate and properly licensed

• Your home’s value and your loan remain protected

If you send the check directly to a contractor or attempt to deposit it without lender involvement, you may face delays later when additional approvals or documentation are required.

Why lenders are involved in processing insurance checks

It is common to wonder why your lender needs to be involved at all. The reason is straightforward: When a mortgage is in place, the home is shared collateral.

Your lender’s role includes:

• Verifying that repairs are necessary and appropriate

• Confirming that work is performed by qualified professionals

• Releasing funds in stages to keep repairs on track

• Ensuring that the property is restored to a livable and secure condition

For larger claims, particularly those for $40,000 or more, a licensed contractor is required. In some situations, even smaller claims may require a licensed contractor, depending on the status of the loan.

Step three: Choose the right contractor, and avoid storm chasers

After major weather events, contractors often appear quickly. While many are reputable, others are known as storm chasers.

Storm chasers often:

• Travel from state to state following severe weather

• Pressure homeowners to sign contracts immediately

• Request large upfront payments

• Avoid providing licensing or insurance information

• Disappear before work is complete, or perform substandard repairs

Working with the wrong contractor can leave you with unfinished work, denied insurance funds or issues when selling or refinancing your home.

How to vet a contractor

Before signing any agreement, take time to do the following:

• Verify that the contractor is licensed in your state

• Ask for proof of insurance

• Request a written and itemized estimate

• Check local reviews and references

• Avoid contractors who demand full payment upfront

• Refuse to sign any contract under pressure

Your lender may require contractor documentation before releasing insurance funds. This is another reason to involve your financial institution early in the process.

Step four: Understand how insurance funds are released

Once Westerra Credit Union receives the insurance check and required documentation, funds are typically released in stages rather than all at once. This helps ensure that repairs are completed properly before additional funds are distributed.

You will receive clear communication that outlines:

• What documents are required

• How funds will be released

• When inspections may be needed

• Whom to contact with questions

This process helps keep repairs moving forward while reducing the risk of delays or fund misuse.

When insurance proceeds exceed your loan balance

In some cases, insurance proceeds may be greater than the remaining balance on your loan. When this happens, you may have the option to pay off your loan using the insurance funds.

This option requires making a written request and coordinating with Westerra Credit Union’s Loss Draft Department. Depending on your situation, this option may be worth exploring.

You do not have to figure this out alone

Property damage is stressful enough without having to navigate complex financial steps on your own. The good news is that there is a clear path forward and support along the way.

At Westerra Credit Union, our team is here to help you understand what is required, avoid common pitfalls and move confidently toward restoring your home.

When something unexpected happens, knowing the right next step makes all the difference.

Helpful reminder

If you experience property damage and have questions about an insurance check or the repair process, contact Westerra Credit Union’s Loss Draft Department before starting repairs. Early communication can save time, stress and money.