What is the purpose of a Mortgage Clause in an insurance policy?

The purpose of a Mortgage Clause in an insurance policy is to protect the lender's interest in the property being insured, even if there are breaches of contract by the borrower or the insured party. This clause ensures that the lender is compensated for their loss in the event of a claim, regardless of any actions by the borrower that may otherwise affect the insurer’s obligations.

If there are any defaults or issues with the insurance policy, such as non-payment of premiums or other breaches of policy terms by the insured, the mortgage clause guarantees that the lender will still have the right to recover losses. This is critical for lenders because it allows them to maintain a level of financial security on their investment.

Other options may address aspects of insurance or financing, but they do not encapsulate the primary intent of a Mortgage Clause in safeguarding the lender's interests in the event of a claim scenario.