It's a time for celebrating when the loan on your car or the mortgage on your house has been finally paid off. During the celebrations however, don’t forget to notify your insurance company, or you may encounter some issues down the road.
When you arrange a mortgage or loan, the financial institution’s name is added to your insurance policy in order to protect their interest. Under the terms of the contract, you agree to insure your house or car at all times and, if the policy is ever cancelled, the financial institution will receive a written notification.
If your house or car is damaged and the repairs are covered under your insurance policy, the insurance company will pay the repair company directly when the work has been completed. There are situations however, when the insurance company may issue a claim cheque to you. For example, when accepting a cash settlement rather than having repairs done, or when your car is written off in an accident.
If the financial institution is still being shown on your policy, the insurance company will issue a cheque in both of your names. In order to cash the cheque, you must obtain a signature from the financial institution and this will typically cause delays while they review and update their records.
Another option is to return the cheque to the insurance company and have them issue a new cheque in your name only. Before they can do this however, they’ll need a copy of your discharge papers in order to remove the financial institution’s name from your policy. Again, this will cause delays.
If you plan to pay off a loan or mortgage in the near future, please contact us and we’ll guide you through the process. You could even qualify for a discount on your Homeowners policy.