Lenders & Contracts · Insurance Term
Mortgagee Clause (Standard Mortgage Clause)
Definition
A mortgagee clause is the part of a property policy that protects the lender holding a mortgage on the building. It lets the lender collect claim payments for its interest and usually keeps the lender protected even if the owner's own claim is denied for the owner's actions.
In Plain English
When you finance a building, your lender is listed on the property policy as mortgagee or mortgage holder. The standard commercial property form includes mortgageholder provisions that give the lender its own rights. Claim payments for the building are typically made to both you and the lender.
The key protection is independence. If your claim is denied because of something you did, such as missing a condition, the lender can often still be paid if it meets its own duties. Those commonly include paying premium if you do not, submitting proof of loss if asked, and telling the insurer about changes in risk it knows of. The lender also usually receives advance notice of cancellation or nonrenewal.
This is the main way lenders protect their insurable interest in real estate. It is different from a basic loss payee and similar to a lender's loss payable endorsement. Your lender insurance requirements will spell out how the lender must be named.
Not sure how your policy handles this? Have us review it, or get a quote.
Example
Hypothetical: a hotel with a $5,000,000 loan has a fire. The insurer denies the owner's claim over a misrepresentation in the application. Under the mortgagee clause, the lender may still be paid up to its loan balance, while the owner receives nothing.
What to Watch For
- Use the lender's exact name, address and loan number as given in your loan documents.
- Add a second mortgagee if there is a second loan on the property.
- Send an ACORD 28 to the lender at every renewal and after any change.
- Remove old lenders when a loan is paid off or refinanced.
Common Questions
Why is my lender's name on my insurance check?
The mortgagee clause gives the lender a right to claim payments for the building, so checks are typically issued jointly. Lenders often hold repair funds and release them as work is completed.
Does the mortgagee clause protect me as the owner?
Not directly. It protects the lender's interest. Your own protection depends on meeting your policy's conditions.
Last updated October 14, 2026 · Primesure editorial team · How We Write