Posted by admin on June 14, 2010
Most of the policyholders after doing a settlement with the creditor do not think about a claim that they have to show to the IRS for tax treatment. In order to protect from the wrath of the IRS, it is important to open a special checking account which will only be used for your insurance claim replacements and repairs.
When you get the first check from the insurance company, go to your bank and open a separate account just for handling claim issues. When you receive the payments for the claim, deposit them in this checking account. You should be using this checking account for the purpose of any expenses of the claim. Close the account after the claim is completed.
When an insurance company issues advance payments against the ALE or content losses, the checks will be payable only to you, because there’s no mortgage on your contents. So, those checks can be deposited directly into your claim account.
If you get a settlement check, do not deposit it in your normal checking or savings account. It will be a good idea to keep a separate account for insurance claim related expenditures. This will also help in maintaining good records.
If you have got a dwelling coverage and you ask for an advance, the insurance company will need the name and address of your mortgage company. The check will be issued jointly in your name and the name of the lender. The check might be sent to you and the lender will like you to endorse it and give the check to them. Then they will set up a repayment plan. You must contact the Escrow department of your mortgage company in order to know more about the payment system and how it works. Each lender is different. You should contact the lender and know his plans.
This same procedure will be used by the insurance company when they issue the checks for repairs to the dwelling or even settlement for a car wreck. Anything you own that also has a lien holder or mortgage holder will be issued jointly in the name of the owner and the name of the lien holder. If you own your dwelling or vehicle free and clear, the insurance company will issue your settlement check only in the name of the owner.
When you get the claim, don’t waste it in weekend vacation or buy a new motorcycle you have always wanted unless and until you can afford to do so. Keep them separate and you will have a more pleasant insurance claims experience.