Standard Mortgage Clause

What Does Standard Mortgage Clause Mean?

A standard mortgage clause, also known as a union mortgage clause, is an insurance provision that protects the mortgage lender, not the borrower, in cases of loss involving the mortgaged property. This clause safeguards the lender even if the borrower intentionally damages the property.

Insuranceopedia Explains Standard Mortgage Clause

The standard mortgage clause ensures that the mortgagee can still receive compensation from the insurance company, even if the policy is voided due to misconduct by the insured borrower involving the mortgaged property.

For example, if a borrower intentionally sets fire to an insured and mortgaged property to file a fraudulent claim, and the fire is determined to be arson, the insurance company will void the borrower’s policy. However, under the standard mortgage clause, the mortgagee remains entitled to compensation for the loss caused by the damaged property.