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Simple English definitions for legal terms
simple mortgage clause
Read a random definition: consuetudinary law
A quick definition of simple mortgage clause:
A simple mortgage clause is a part of an insurance policy that protects the rights of a lender when the property being insured is subject to a mortgage. This clause usually states that any insurance payouts must be divided between the borrower and the lender based on their interests. It is also known as a mortgagee clause and is different from an open mortgage clause, which does not protect the lender if the borrower invalidates the policy.
A more thorough explanation:
A simple mortgage clause is a provision in an insurance policy that protects the rights of a mortgagee when the insured property is subject to a mortgage. It ensures that any insurance proceeds are allocated between the named insured and the mortgagee "as their interests may appear."
For example, if a homeowner has a mortgage on their property and the property is damaged in a fire, the insurance company will pay out the insurance proceeds to both the homeowner and the mortgagee. The amount each party receives will depend on their respective interests in the property.
A simple mortgage clause differs from an open mortgage clause, which does not protect the mortgagee if the insured mortgagor does something to invalidate the policy, such as committing fraud. A standard mortgage clause, on the other hand, protects the mortgagee's interest even if the insured mortgagor does something to invalidate the policy.
Overall, a simple mortgage clause is an important provision in an insurance policy that helps protect the interests of both the homeowner and the mortgagee.