Compare the 2 types of mortgage endorsements available for use with an automobile policy.
There are 2 different endorsements:
a standard one, not subject to an additional premium
a broad one, subject to an additional premium
a) The Lienholder Protection endorsement is designed to protect the interest of the lienholder, mortgage or assignee (as the case may be) in the following ways:
1) If the damage to the automobile covered by the physical damage section of the policy is not repaired, or the lost or damaged parts are not replaced, the loss will be payable - as their interests may appear - to both the mortgagee and the insured
2) The insurer agrees to notify the mortgagee, in writing, of cancellation of the policy, giving 15 days' notice. This obligation does not extend beyond the expiration date of the policy
Then, there is provision in the endorsement to note the coverage which the insured has under the physical damage section of the policy. In practice, where a mortgage endorsement is used, the mortgagees are not provided with a copy of the entire policy since they have no interest in the other coverages which the insured may have.
b) The coverage under the second endorsement is considerably broader than the coverage under the endorsement just discussed, hence, an additional premium is charged
As with the other endorsement, there is provision to pay the lienholder in the event that loss or damage is not repaired, and there is provision to notify the lienholder, subject to 15 days' notice, of cancellation of the policy. However, the endorsement also provides protection for the lienholder in that a breach of a condition by the insured, or a misrepresentation in the application, or fraud by the insured in making a claim will not invalidate protection as far as the lienholder is concerned.
The lienholder agrees to the following:
a) If the insured does not pay premiums, the liendholder will pay them on demand.
b) When a material change comes to the attention of the lienholder, the lienholder will notify the insurer within 15 days of the change, and pay on demand any additional premium arising from it.
c) If the lienholder knows of a misrepresentation or other breach of policy conditions, the lienholder will notify the insurer within 15 days of learning of it.
If the insurer pays the lienholder because of the provisions of this endorsement, where the insured would not otherwise have been paid, the insurer gains the right of recovery against the insured.