Registered Insurance Brokers of Ontario (RIBO) Practice Exam

A mortgage clause is primarily included in an insurance policy to protect the mortgagee’s interest in the property. This is crucial because when a property is financed through a mortgage, the lender (mortgagee) has a financial interest in the property. If a loss occurs, such as damage or destruction, the mortgage clause ensures that the insurer acknowledges the rights of the mortgagee in relation to insurance proceeds.

The presence of this clause allows the lender to receive payments directly from the insurance company in the event of a claim, which helps ensure that their investment is safeguarded. Even if the borrower defaults on the mortgage or the property is not maintained, the lender’s interest in the property remains secure through the insurance policy.

The other options, while related to property values and risks, do not directly address the specific function of the mortgage clause in protecting the mortgagee's financial stake in the insured property. Thus, emphasizing the mortgagee's protection is the fundamental purpose of including this clause in an insurance policy.