Question 1 of 20
How would you explain insurable interest when a building is mortgaged? Distinguish the owner's economic interest from the lender's separate interest.
Strong Interview Answer
Ownership gives the insured an economic interest because damage can reduce the value of the property. A mortgagee or secured lender can also have a separate insurable interest based on the debt and collateral; one interest does not eliminate the other.
What to Listen For
- economic stake
- owner can suffer financial loss
- mortgagee has a separate interest
- interests need not be identical
Caution
Do not reduce the owner's insurable interest to the mortgage balance or assume only the titleholder can have an insurable interest.