Glossary

Mortgagee Clause

Also known as: Lender's Loss Payable Clause, ISAOA/ATIMA

A standard endorsement added to a property insurance policy naming the lender as an insured party, so that insurance proceeds from a covered loss are payable to the lender (up to its loan balance) regardless of certain acts or omissions by the borrower that might otherwise void the borrower's own coverage.

A mortgagee clause is what actually protects a lender's collateral value after a casualty -- without it, a lender relying solely on the borrower being a named insured could have its interest jeopardized by the borrower's own policy violations (for example, a coverage lapse or a misrepresentation on the application) that would void the borrower's claim but should not defeat the lender's separate, protected interest. Lenders typically require the clause to be written on a standard form (often referencing 'its successors and/or assigns' -- commonly abbreviated ISAOA/ATIMA) so the protection automatically follows if the loan is sold or assigned, without requiring the policy to be re-issued. Confirming the mortgagee clause names the correct lender, in the correct form, is a standard closing-checklist item, since an incorrectly named or omitted clause can leave a lender without a direct claim on insurance proceeds after a loss.