Mortgagee Insurance

What Does Mortgagee Insurance Mean?

Mortgagee insurance is a policy included when an individual obtains a loan from a financial institution, such as a bank, to purchase a property. This policy protects the lending institution and ensures the property can be reclaimed in the event of a dispute.

Insuranceopedia Explains Mortgagee Insurance

When an individual borrows money from a bank to purchase a property, they may be required to purchase and sign a mortgagee policy. This policy can also be incorporated as a provision in the loan agreement, in which case it becomes a mortgagee clause.

The purpose of this clause is to identify the lender and grant them authority over the property if the borrower fails to meet their financial obligations. In practice, the lender will require the borrower to keep hazard insurance on the property for the life of the loan, with the bank named on the policy so any payout for damage goes toward repairing the home that secures the mortgage. Borrowers shopping for their first policy often start by comparing the best homeowners insurance companies to find a carrier that meets their lender’s requirements.