Mortgagee Clause
Plain English
A mortgagee clause names your mortgage lender on your home insurance policy. Because of it, when you have a claim for damage to the house, the check is typically made out to both you and the lender, which releases the money as repairs are done. Lenders require it as a condition of the loan.
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On this page
Definition
A mortgagee clause is a provision in a property policy that names the lender (the mortgagee) and protects its interest in the property. Because of it, claim payments for damage to the home are typically made out to both the homeowner and the lender, and the lender is generally notified if the policy is cancelled.
Why It Matters
It explains why you can't deposit a home repair check on your own, and why your lender hears about it if your coverage lapses.
Real-World Example
Imagine a kitchen fire causes $40,000 of damage to a mortgaged home. The insurer issues the check to the homeowner and the bank. The homeowner endorses it and sends it to the bank, which releases payments to the contractor in stages as the work is done.
Common Misconceptions
- Assuming the lender gets the money to pay down the loan; usually it's released for repairs.
- Assuming the clause applies to payments for belongings.
Key Takeaways
- Texas Department of Insurance: "If you owe money on your home, the insurance company will make the check for repairs out to both you and your mortgage company."
- "In most cases, the mortgage company will deposit the check and release money to you as the work is done," per TDI.
- Payments for belongings and living expenses usually go to you.
- Keep your lender's name and loan number current on the policy.
Frequently Asked Questions
Why is my lender on my policy?
Because the house secures the loan, so the lender requires its interest to be protected.
What's it commonly confused with?
A loss payee, the similar arrangement for cars and other property.
Related Terms
Related Coverages
- Homeowners Insurance
Related Scenarios
Explore the rest of the Homeowners Insurance category.
Browse Homeowners Insurance terms →Sources
The factual claims on this page were checked against these sources. Rules and figures change, so check the source itself if you need to confirm the current version.
- Home insurance guideTexas Department of Insurance
Educational information, not advice: This page is for general education only, not legal, financial, or insurance advice. Actual coverage, discounts, and requirements depend on your policy’s wording, your insurer, and the laws of your state. Confirm specifics with your own insurer or a licensed agent before making a decision. Insurpedia does not sell insurance and does not recommend specific insurers.