Question

Homeland Housing Corp holds a mortgage on a property that John and Carol Thomas purchased. John and Carol have a Homeowners policy with Home Protection Insurance, which has a mortgage clause naming Homeland as a loss payee. If John and Carol suffer a fire to their home:

A) Homeland Housing Corp would receive the full insurance payout, and John and Carol would need to negotiate separately for any remaining funds.

B) John and Carol would receive the full insurance payout to repair their home.

C) Homeland Housing Corp and John and Carol would share the insurance payout based on their respective interests.

D) John and Carol would receive the insurance payout, and Homeland Housing Corp would not be involved.

Answer 1

Homeland Housing Corp and John and Carol would share the insurance payout based on their respective interests, ensuring that both the mortgage balance and home repairs can be addressed.

Step-by-step explanation:

When John and Carol Thomas, who have a Homeowners policy with Home Protection Insurance, suffer a fire to their home, the correct answer regarding the distribution of their insurance payout is C) Homeland Housing Corp and John and Carol would share the insurance payout based on their respective interests. A mortgage clause in an insurance policy that names a bank or financial institution as a loss payee ensures that the interests of both the mortgage holder and the property owner are protected in the event of a loss. Therefore, the insurance settlement will be divided, with Homeland Housing Corp receiving enough to cover the outstanding mortgage balance, while any remaining funds go to John and Carol to assist with home repairs or rebuilding costs, consistent with the conditions of their insurance policy.