Mortgage Certificates Of Insurance

Certificates Of Insurance For Mortgagee

If you own real property with a loan, you are the mortgagor. This is a legal term that means you have given your lender a security interest in your property called a Mortgage. The lender is the Mortgagee. It may be a bank, credit union or any other entity that lends you money to purchase or refinance real property. To protect their interests all Mortgagees require the Mortgagor obtain an insurance policy. Keep reading for a very important money saving tip below.

These policies generally have two parts:

• Property Coverage: This basic property insurance usually covers losses caused by fire, lightning, wind and hail, or acts of vandalism. Additional coverage maybe required by the Mortgagee for loss due to earthquakes or flooding.
• Liability Coverage: Even though this insurance is not related to the value of the physical structure. Mortgagees generally will require that the policy provides liability coverage in case someone other than the property owner or renter is injured while on the property and decides to sue.

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How Does a Certificate of Insurance for Mortgagees Work

A Certificate of Insurance for Mortgagees is important because it states who has legal right to financial reimbursement in the event the property in question suffers a loss.

If you take out a loan to buy a piece of real estate, you must purchase insurance to protect the Mortgagee or lenders financial interest in the property. This is often referred to as a loss payee. If the property was to suffer a loss from any of the covered perils the insurance company would make sure to pay any money due to satisfy the lender’s/Mortgagee’s financial interest, or more simply put they will payoff the amount that is owed on the Mortgage. Any amount left over will be paid to you.

You may be asked to provide the mortgagee clause when you switch insurance companies or when you first purchase the property. There is always the requirement to purchase hazard insurance in order to satisfy lender requirements. The only way to do this is by providing a Certificate of Insurance for Mortgagees.

When you are asked for this information by your insurance company it  is simply them making sure they have an exact record of who has financial interest in the property. That way, if there is a loss, they can make sure the right people get the money owed to them.