Standard Mortgage Clause Law and Legal Definition

Standard mortgage clause is a clause in an insurance policy that protects the interest of the lender to recover the proceeds even if the borrower is at fault. This type of clauses is mainly included in fire and casualty insurance. The incorporation of this clause in an insurance policy leads to the creation of a separate contract between the insurer and the mortgagee. However, this type of clause empowers the mortgagee to collect payment from the insurer even if the policy is void or voidable with regard to the insured. This clause is also termed as a union mortgage clause. The object of the clause is to provide an additional coverage for the mortgage lender.