A mortgage company is named as a loss payee on the insured's homeowners policy. If the insured suffers a loss due to a fire, what is true about the payment of the loss?

In the context of a homeowners insurance policy, when a mortgage company is named as a loss payee, it means that the mortgagee has a vested interest in the property that is insured. This designation typically ensures that the mortgagee is protected in the event of a loss, such as a fire.

When a loss occurs, the payment process involves both the insured (the homeowner) and the mortgagee (the mortgage company). The loss payment generally goes to both parties because the insured has an interest in restoring their home, while the mortgagee needs assurance that its financial interest in the property is also protected. Thus, the insurance policy will typically require the insurer to issue a payment that reflects the interests of both the insured and the mortgagee.

This is why the correct response indicates that the loss is payable to both the insured and the mortgagee, ensuring that the homeowner can repair or replace their property and that the mortgage company’s loan remains secure against the property.