Which statement best describes the protection given to a lender under a standard (union) mortgage clause in a property policy?
Explanation
A standard or union mortgage clause creates an independent contract between the insurer and the mortgagee. The lender's right to recover is not voided by the borrower's act or neglect (such as misrepresentation or vacancy) as long as the lender pays any premium due and gives notice of any change in occupancy or hazard that becomes known to it. An open or simple mortgage clause does not give the lender this independent protection.
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Related questions on this topic
- A 12-year-old roof with a normal life of 20 years is destroyed by a covered windstorm. Under a replacement-cost (RC) loss settlement, how is the loss generally paid?
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- Under a typical commercial property vacancy provision, what generally happens if the building is vacant for more than 60 consecutive days before a covered loss occurs?
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