A mortgagee is entitled to certain consideration in the event of a loss to property when indicated as the mortgagee on an insurance policy. Which one (1) of the following is the consideration? OA) The mortgagee is entitled to the proceeds of the insurance to the extent of its financial interest in the property. OB) The mortgagee is entitled to the full proceeds of the insurance. OC) The insured and the mortgagee are permitted to consider the loss and decide between them how much each will receive. OD) The insurer pays the entire loss to the insured who is required to satisfy the mortgagee.
A mortgagee is entitled to certain consideration in the event of a loss to property when indicated as the mortgagee on an insurance policy. Which one (1) of the following is the consideration? OA) The mortgagee is entitled to the proceeds of the insurance to the extent of its financial interest in the property. OB) The mortgagee is entitled to the full proceeds of the insurance. OC) The insured and the mortgagee are permitted to consider the loss and decide between them how much each will receive. OD) The insurer pays the entire loss to the insured who is required to satisfy the mortgagee.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Transcribed Image Text:A mortgagee is entitled to certain consideration in the event of a loss to property when indicated as the mortgagee on an
insurance policy. Which one (1) of the following is the consideration?
OA) The mortgagee is entitled to the proceeds of the insurance to the extent of its financial interest in the property.
OB) The mortgagee is entitled to the full proceeds of the insurance.
OC) The insured and the mortgagee are permitted to consider the loss and decide between them how much each will
receive.
OD) The insurer pays the entire loss to the insured who is required to satisfy the mortgagee.
Expert Solution
Step 1: Conceptual understanding of Mortgagee and its rights
A mortgage is the entity that lends money to the borrower to purchase any asset. A mortgage provides a loan as part of the agreement and they take a security interest in the property being purchased.
In the given question, if the mortgagee is mentioned in the insurance policy taken by the insured against the mortgaged property, the mortgagee is liable for the financial interest in the property.
Hence as per the above discussion, we can say that
"Mortgage is entitled to the proceeds of the insurance to the extent of the financial interest in the property" represents a correct statement.
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