What is a Mortgagee Clause?

What is a mortgagee clause?

A mortgagee clause typically is a provision included in a property insurance policy protecting the mortgagee (lender) from financial loss in the event mortgaged property is damaged -- physical or otherwise. Put another way, a mortgage clause is insurance coverage between the lender and property insurance company that protects the lender and their interest in the property. Most commonly this protects lenders downside when there is physical damage done to the property and it was not initially reflected in the valuation of the property. This clause is often added to homeowners insurance policy (and increases its costs for the homeowner) and is required by mortgage lender to be able to extend a mortgage loan.