What Is a Mortgage Clause in Flood Insurance?
If your mortgage lender rejected your flood insurance, this could be why.
When you’re required to carry flood insurance by your mortgage company, you might think buying the policy is enough. But if your lender tells you it’s “missing a mortgage clause,” your closing could be delayed or your policy rejected entirely.
That’s a common and frustrating issue for many homeowners, especially first-time buyers.
At The Flood Insurance Guru, we help clients every day navigate flood insurance requirements—including correctly adding mortgage clauses—so their coverage isn’t declined by their lender at the last minute.
In this quick guide, you’ll learn what a mortgage clause is, why your lender needs it, and how to make sure your flood insurance policy includes it the right way.
What Is a Mortgage Clause?
A mortgage clause in flood insurance is a legal statement that protects your mortgage lender. It ensures that if your property is damaged or destroyed by flooding, your lender is paid before you are, because they have a financial interest in the property.
This clause is also called a mortgagee clause, and it typically includes:
-
The name of the lender (mortgagee)
-
Their mailing address
-
Their loan number
Without this clause, your flood insurance may still be active—but your lender won’t accept it.
Why Do Lenders Require It?
Lenders require mortgage clauses to protect their investment. If your home is damaged and a claim is paid, the lender wants to ensure that the money is used to repair the home that secures their loan, not used elsewhere.
How Do You Add It?
When buying or renewing flood insurance, you’ll be asked for your mortgage company’s information. It’s critical to provide the exact name and address they use for insurance, not a variation or P.O. box unless specified.
Even one small error, like the wrong lender name or address, can cause the policy to be rejected by underwriting or your lender.
Final Thoughts: What To Do Next
At the end of the day, getting your flood insurance in place is only part of the process. This is especially true if your lender has strict requirements. Now that you’ve learned from The Flood Insurance Guru what a mortgage clause is and why it matters, make sure to double-check that your lender’s name and address are listed correctly on your policy.
Topics:
