Mortgagee Clause
A mortgagee clause names the lender on the property insurance policy and provides the lender with certain protections, including the right to receive claim payments and notice of cancellation.
The mortgagee clause, also called the standard mortgage clause, is a policy provision that protects the lender's financial interest in the insured property. It names the mortgage holder as a party entitled to receive property insurance claim payments and provides the lender with protections that are independent of the property owner's compliance with policy terms.
Under a standard mortgagee clause, the lender's interest in the policy is not voided by acts or omissions of the property owner. If the owner fails to disclose information, violates policy conditions, or commits fraud, the lender's coverage remains intact. The insurer must also provide the lender with advance notice, typically 30 days, before canceling or non-renewing the policy. This gives the lender the opportunity to pay any overdue premiums, arrange alternative coverage, or take other protective action.
Every apartment mortgage loan requires the lender to be named under the mortgagee clause on the property insurance policy. The exact naming convention, including the lender's full legal name, address, loan number, and ISAOA (its successors and/or assigns) language, is specified in the loan documents. Errors in the mortgagee clause can delay claim payments and create compliance issues, so accuracy is essential.