The clause in insurance policies indicating the lender (mortgagee) and its assignees as beneficiaries of the insurance policy. If the subject property is destroyed, the insurer will normally first pay off the existing mortgage balance before disbursing any surplus insurance claims to the home owner. The exception would be if the insurance disbursements were earmarked directly toward reconstruction. Otherwise, lenders may be left holding the bag for a large mortgage balance on a property now worth only the land. For more information, see the "Hazard Insurance" article in the "Mortgage Industry" section.
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