Reverse Mortgage and Property Damage

Across the country, homeowners ask the same question after a major event:

“What happens to my reverse mortgage if my home is damaged or destroyed?”

It’s a fair question. A wildfire in California. A tornado across the Midwest. A hurricane along the Gulf or East Coast. An earthquake in the Pacific Northwest. A blizzard in New England. A hailstorm in Texas. Every region has its own version of disaster — and any of them can hit hard and fast.

If you have a reverse mortgage on the home, you may be wondering how the insurance check works — and whether the damage puts your loan at risk.

The short answer is this: a reverse mortgage doesn’t go away when your home is damaged. But there are clear rules to follow, and the steps you take in the first few days really matter.

Here’s what you need to know.

Your Insurance Still Covers the Home

When you have a reverse mortgage, you’re required to keep homeowners insurance on the home. This is true for any mortgage — reverse or not.

Depending on where you live, you may also need extra coverage:

• Flood insurance through the National Flood Insurance Program (NFIP) if your home is in a designated flood zone. This is common in coastal areas, river valleys, and parts of the Midwest and Southeast.
• Wind coverage as part of your policy or as a separate endorsement. Often required in hurricane-prone areas like the Gulf Coast and Atlantic Coast.
• Earthquake coverage as a separate policy or endorsement. Important in California, Alaska, and the Pacific Northwest.
• Wildfire coverage is usually part of standard homeowners insurance, but coverage and availability have been changing in high-risk states like California, Oregon, and Colorado.

Standard homeowners insurance covers many things — fire, wind damage, falling trees, burglary — but it usually does not cover floods or earthquakes. Those are separate policies. NFIP flood policies currently cap coverage at $250,000 for the home itself.

If you’re not sure whether you have the right coverage for your area, now is the time to check. Not after a storm or wildfire is in the forecast.

Who Gets the Insurance Check?

This is the question most homeowners want answered. And the answer surprises many of them.

The insurance check is made out to both you and your loan servicer.

This is called a two-party check. It’s standard practice for any mortgage — reverse or traditional. The lender is listed on your insurance policy because they have a financial interest in the home. The check has both names on it because both parties need to sign off before the money can be used.

Here’s how it usually plays out:

1. You file the claim with your insurance company
2. The insurance company sends a check made out to you and your servicer
3. You endorse the check and send it to your servicer
4. The servicer releases the funds — sometimes all at once for small amounts, sometimes in stages as repairs are completed and inspected

Why the staged approach for bigger claims? It’s a protection. The servicer wants to make sure the repair money actually goes into repairing the home — not somewhere else, leaving the home in disrepair.

For smaller claims (like a hailstorm that took out a few windows), the servicer may sign off and release the full amount once they have a few photos of the repairs.

For larger claims (like a wildfire or tornado that took out a whole wing of the house), expect a draw schedule with inspections along the way.

What If My Home Is Completely Destroyed?

This is the worst-case scenario — and yes, it happens. Wildfires take entire neighborhoods. Tornadoes level homes in minutes. Hurricanes wash whole streets away.

If your home is totally destroyed, the same general rules apply:

• The insurance check is made out jointly to you and your servicer
• The funds are typically used to rebuild the home
• For a full rebuild, the funds are usually released in stages tied to construction progress

There’s an important question to ask yourself early: do you plan to rebuild and return, or not?

If you plan to rebuild and live in the home again, the reverse mortgage stays in place. You can even certify your annual occupancy as long as your intent is to return to the home as your main residence.

If you decide not to rebuild — maybe you want to sell the lot or move closer to family — the loan would become due and payable, since the home is no longer your main residence.

At that point, the insurance funds and any land sale proceeds would be applied to the loan balance, and any leftover amount goes to you or your estate.

Step-by-Step: What to Do After a Disaster

If your home is damaged, here’s the order to do things in.

Step 1: Make Sure Everyone Is Safe

Before anything else, take care of yourself and your family. Insurance and paperwork can wait. Your safety can’t.

Step 2: Document the Damage

Before you clean up or start any repairs, take photos and videos of everything. Walk through every room. Get the outside of the house. Get any damaged belongings.

These photos are the backbone of your insurance claim. The more you have, the smoother the claim will go.

Step 3: File Your Insurance Claim

Call your insurance company as soon as it’s safe to do so. Ask them what documentation they need and how the check will be issued.

Be ready to provide:

• Your policy number
• Photos and videos of the damage
• A written description of what happened
• Receipts for any emergency expenses (hotel, food, temporary repairs)

Step 4: Notify Your Loan Servicer

Once your claim is filed, contact your reverse mortgage servicer. Let them know:

• What happened
• That you’ve filed a claim
• Whether you plan to repair and stay, or not

Many servicers ask you to send written notice (certified mail with a return receipt is best). Keep a copy of everything.

Step 5: Apply for FEMA Assistance (If You Qualify)

If your area has been declared a Presidentially-Declared Major Disaster Area (PDMDA), you may qualify for help from FEMA on top of your insurance.

You can apply at DisasterAssistance.gov or by calling (800) 621-FEMA (3362).

FEMA assistance can help with things insurance doesn’t cover — temporary housing, replacement of essential items, and other disaster-related needs.

Step 6: Keep Up with Property Charges

This part is critical and often missed during a crisis.

Even after a disaster, you’re still responsible for:

• Property taxes
• Homeowners insurance premiums
• HOA fees (if you have them)
• Flood, wind, or earthquake insurance, if required

Falling behind on these can put your loan in default — even if your home is unlivable. If money is tight, contact your servicer right away. They may have options to help.

Can I Still Use My Line of Credit During a Claim?

Yes, in most cases.

If you have a HECM with a line of credit, you can still draw on it as long as your loan is in good standing. The line of credit doesn’t automatically freeze just because your home was damaged.

There are a few situations where a lender doesn’t have to keep funding draws — for example, if the loan has been called due and payable, if you’ve filed for bankruptcy, or if the loan has been assigned to HUD. But in a typical “home was damaged, working on repairs” situation, your line of credit stays open.

This can be a real lifeline during recovery. The funds can help cover:

• Temporary housing while repairs are underway
• Out-of-pocket expenses insurance won’t cover
• Repair costs over your deductible
• Bridging the gap while you wait for insurance to pay out

For homeowners with proprietary or “jumbo” reverse mortgages, the rules can be different — those are set by the investor that owns the loan. Check with your servicer if you’re not sure.

Disaster Relief and Foreclosure Protections

If your home is in a federally declared disaster area, there are extra protections built in.

The FHA grants an automatic 90-day extension of foreclosure timelines for HECM loans in disaster zones. That gives borrowers and their families breathing room to file claims, work through repairs, and figure out next steps without the added pressure of a foreclosure clock running out.

If you’re worried about meeting your loan obligations after a disaster, talk to your servicer right away. The earlier the conversation happens, the more options you typically have.

Common Misunderstandings

“The lender takes my insurance money and keeps it.”

Not true. The lender is a co-payee on the check so the funds get used to repair the home — not pocketed by the lender. If repair costs are less than the insurance payout, the leftover funds belong to you (or, if the loan is paid off, are returned to you).

“My home was destroyed, so the loan is wiped out.”

No. The insurance is meant to repair or rebuild the home. If you don’t rebuild and the home is no longer your main residence, the loan becomes due and is repaid from the insurance proceeds, the sale of the lot, or other assets.

“Standard homeowners insurance covers everything.”

It doesn’t. Floods and earthquakes are not covered by standard policies. Wind damage is sometimes a separate endorsement. Coverage rules vary by region, so check your policy carefully.

“If I can’t make repairs fast enough, my loan will default.”

Servicers want to see reasonable progress, not impossible deadlines. As long as you’re communicating with your servicer and making a real effort, most situations can be worked through.

The Bottom Line

A reverse mortgage doesn’t disappear after a disaster. But the rules are clear, and most situations have a path forward — whether you’re recovering from a wildfire, a hurricane, a tornado, an earthquake, or anything else.

The keys are:

• Document everything
• File your insurance claim quickly
• Notify your servicer right away
• Stay current on property taxes, insurance, and HOA fees
• Communicate often with everyone involved

The biggest mistake homeowners make is going silent during a crisis. The earlier you make the calls, the more options you have.

See What You May Qualify For

If you’re considering a reverse mortgage and want to understand how property protection fits into the bigger picture, the best place to start is to run the numbers.

You can get a personalized estimate in seconds using our free calculator. No pressure. No obligation.

Get your instant reverse mortgage quote today and see what may be possible.

If you’d rather talk it through with a real person, our team is happy to walk you through your options. Call us at (888) 249-5651.

FAQ — Reverse Mortgages and Property Damage

What happens if my house is destroyed and I have a reverse mortgage?

The reverse mortgage stays in place. Your insurance check is made out to both you and your servicer. The funds are usually used to rebuild the home. If you decide not to rebuild and the home is no longer your main residence, the loan becomes due and is paid off from the insurance funds, land sale, or other assets.

Does the insurance check go to the lender or to me?

Both. The check is made out jointly to you and your loan servicer. You endorse it and send it to the servicer, who then releases the funds — either all at once for smaller claims, or in stages for bigger ones tied to repair progress.

Do I need flood or earthquake insurance with a reverse mortgage?

If your home is in a designated flood zone, flood insurance is required. Earthquake insurance is generally optional but worth considering if you live in a high-risk area like California or the Pacific Northwest. Neither flood nor earthquake damage is covered by standard homeowners insurance.

Can I still use my reverse mortgage line of credit during a claim?

In most cases, yes. As long as your loan is in good standing, your line of credit stays open. The funds can help cover temporary housing, deductibles, and out-of-pocket repair costs while you wait for the insurance claim to pay out.

What if I can’t keep up with property taxes or insurance after a disaster?

Contact your servicer right away. Falling behind on property charges can put your loan in default. The earlier you reach out, the more options you typically have.

How long do I have to make repairs?

There’s no hard deadline, but servicers want to see reasonable progress. If repairs are stalled or stretching out longer than expected, communicate with your servicer and keep them updated. Going silent is the worst thing you can do.

Are there extra protections in a federally declared disaster area?

Yes. The FHA grants an automatic 90-day extension of foreclosure timelines for HECM loans in Presidentially-Declared Major Disaster Areas. You may also qualify for FEMA assistance through DisasterAssistance.gov or (800) 621-FEMA.

What if I want to sell instead of rebuild?

That’s an option. The reverse mortgage gets paid off from the sale of the home (or lot, if the home is destroyed) plus any insurance proceeds. Anything left over belongs to you or your estate.