Over the years, I have had the same question asked numerous times: How do we get paid when both the lender and the property owner are loss payees on the check from the insurance company?
It is common practice for a lender in their loan documents to require a property owner to maintain insurance coverage on the building the lender is making a loan on. Lenders do this to avoid a situation where a peril of some sort (i.e., fire, lighting windstorm, hail, etc.) makes the building worth less than the outstanding amount of the loan. Lenders do everything they can do to avoid having no collateral value to back a loan on a property. Lenders force borrowers to purchase property insurance to protect the collateral backing the loan. If a borrower does not provide annual evidence that the building is insured, the lender will purchase the insurance coverage and bill the borrower for the premium.