Insurance claim and mortgage terms, explained.

Loss Draft

Also: Loss Draft Process, Loss Draft Claim, Mortgage Loss Draft

A loss draft is the process a mortgage servicer uses to hold and release insurance claim funds when an insurance check is made payable to both the homeowner and the mortgage company.

Insurance Check Endorsement

Also: Claim Check Endorsement, Mortgage Endorsement

An insurance check endorsement is the mortgage servicer's signature on the back of an insurance claim check, required before the funds can be deposited or disbursed when the servicer is listed as a co-payee.

Co-Payee

Also: Multiple Payees, Joint Payee

A co-payee is one of two or more parties named as payees on a check, all of whom must endorse the check before it can be cashed or deposited.

Loss Draft Affidavit

Also: Affidavit of Loss, Claim Affidavit

A loss draft affidavit is a sworn statement from the homeowner (and sometimes the contractor) describing the damage, the insurance claim, and the intended use of claim funds. Most mortgage servicers require it as part of the loss draft packet.

Mortgage Servicer

A mortgage servicer is the company that collects your monthly mortgage payment, manages your escrow account, and handles insurance loss drafts. The servicer is often different from the bank or investor that actually owns your loan.

ACV vs RCV

Also: Actual Cash Value, Replacement Cost Value, Recoverable Depreciation

ACV (Actual Cash Value) is the depreciated value of damaged property; RCV (Replacement Cost Value) is the full cost to replace it new. Most policies pay ACV first, then release the remaining "recoverable depreciation" after repairs are complete.

Recoverable Depreciation

Also: Depreciation Holdback

Recoverable depreciation is the portion of a claim payout that the insurance company withholds until repairs are actually completed. It equals the difference between Replacement Cost Value (RCV) and Actual Cash Value (ACV).

Hazard Insurance

Also: Homeowners Insurance, Property Insurance

Hazard insurance is the portion of a homeowners insurance policy that covers physical damage to the home from fire, wind, hail, water, and similar "hazards." Mortgage lenders require it as a condition of the loan.

Public Adjuster

Also: PA, Claims Adjuster (Public)

A public adjuster is a licensed professional who represents the homeowner in an insurance claim, negotiating with the insurance company's adjuster to maximize the claim payout. PAs typically charge 10–20% of the claim amount.

Conditional Waiver of Lien

Also: Conditional Lien Waiver

A conditional waiver of lien is a document signed by a contractor releasing their mechanic's lien rights on the condition that they receive payment. Most mortgage servicers require it as part of the loss draft packet.

AND vs OR on a Check

On a multi-payee check, "AND" means every party listed must endorse; "OR" means any one party can endorse alone. Insurance claim checks almost always use "AND."

Escrow Account

Also: Mortgage Escrow, Insurance Escrow

A mortgage escrow account is a holding account the servicer uses to collect and pay property-related expenses on the homeowner's behalf — primarily property taxes and insurance premiums. During a loss draft, the servicer also holds insurance claim funds in an escrow-like disbursement account.