Georgia Property & Casualty Practice Exam

Who has insurable interest in a home owned by Frank?

1. Frank's daughter.

2. The mortgagee of Frank's home.

3. The prior owner of Frank's home.

4. The realtor attempting to sell Frank's home.

The correct answer is: The mortgagee of Frank's home.

The mortgagee of Frank's home holds an insurable interest because they have a financial stake in the property. When a mortgage is taken out, the lender (mortgagee) provides funds to the borrower (Frank) to purchase the home. In return, the lender secures a claim against the home through the mortgage. This means that if the home were to be damaged or destroyed, the lender would potentially lose the value of the loan still owed by Frank. Therefore, to protect their investment, the mortgagee needs to ensure that the property is insured. In contrast, while Frank's daughter may have personal feelings associated with the home, she doesn't possess a financial stake that would constitute insurable interest unless she co-owned the property or had some other legal or financial claim to it. The prior owner also lacks insurable interest once ownership has transferred to Frank. Lastly, the realtor does not have insurable interest since their role is to facilitate the sale rather than to hold any financial interest in the property itself.