Defeasance is a circumstance in which a debt or a bond is cancelled or voided due to the fact that the borrower has set aside enough money to pay it.
Mortgage insurance can often be cancelled if defeasance takes place, since there is no more risk of the borrower defaulting.
Defeasance is a positive situation for the borrower because it means that their debt will be completely covered.
It is often a good situation for the lender as well since it means that they do not risk losing money through the borrower defaulting. An insurer can lose a policyholder, however, if the insurance policy is cancelled due to the risk being completely mitigated through defeasance caused by the borrower.
Share this Term
Stay informed with Insuranceopedia!
The world of insurance can be complicated. Subscribe to the Insuranceopedia newsletter and stay in the know! Access expert content, industry term definitions and answers to your questions from knowledgeable insurance insiders. Arm yourself with what you need to know to keep your assets and your family safe.
Latest Articles
