is necessary where a loan is not going into
default and the borrower is still paying the
mortgage, but the borrower is unable to
purchase his or her own insurance coverage.
e lender can have their financial interest
covered. Again, there is no coverage for the
borrower. Foreclosed coverage is designed
to protect the lender's financial interest
and is necessary where a property is in the
foreclosure process and title has been, or is
being transferred.
Mortgage impairment insurance is an
important contingent cover for lenders
especially when faced with a risk of default
by their borrowers. Mortgage impairment
insurance is increasing in significance in an
economy where homeowners and businesses
are over-leveraged and they cannot weather
the negative financial impacts of damage to
their mortgaged residences and buildings. e
risk of losses becomes even greater in a rising
interest rate environment. A borrower may
allow their insurance to lapse due to insurance
being viewed as another expense item.
e frequency and severity of catastrophic
weather and natural events seems to be
increasing and with these events comes more
costly damage and destruction, from which
many people, even when insured, cannot
recover. Mortgage impairment insurance
protects lenders when all other avenues of
compensation fail and should form part of a
lender's overall insurance program.
If you are a mortgage lender and have not
considered this type of coverage, this is an
important insurance to consider. Borrowers
are very unlikely to continue making
mortgage payments if there is a significant
loss. As a lender, wouldn't you want your
financial interests in that property to be
protected? n
p46-47_Mortgage Impairment.indd 47 14-01-23 2:07 PM
