A loss draft is a payment made by an insurer for claims arising from losses incurred by an insured property.
The reasons for such claims are usually due to damages caused by natural disasters.
The losses are estimated when inspectors appointed by the insurer conducts an inspection of the damages on the property.
Also known as a claim check, the check is made to the homeowner and mortgagee.
There are usually very stringent procedures to adhere to when making claims that result in loss drafts.
Some of which are the submission of documents including:
- Estimate of damages report
- Signed contract between homeowner and contractor
- A declaration of intention to complete the necessary repairs
When the payment is amount is less than $10,000, disbursement of funds are often very simple and straight forward. This is also called a non-monitored claim.
However, when the sum is above $10,000, the claim process becomes more tedious and also known as a monitored claim.
On top of that, if the loan which the property is on is judged to be a nonperforming home loan, it would also go through the same procedures as a monitored.
This means that the funds might be disbursed into an escrow account and be slowly released based on a timeline of milestones.