A bank advises a Broker that their client’s mortgage has not been paid for several...

The correct answer is B. because a Comprehensive Homeowner’s Policy does not provide coverage for the borrower’s failure to make mortgage payments . Home insurance protects against insured property and liability losses , such as fire, theft, water damage where covered, or legal liability claims. It is not a credit protection product and does not insure the lender against the client’s simple non-payment of the mortgage loan.

The confusion often arises because mortgages are commonly shown on property policies under the Standard Mortgage Clause . That clause protects the mortgagee’s insurable interest in the property in the event of a covered loss, even where the mortgagor’s acts or neglect might otherwise prejudice coverage. But it does not mean the insurer steps in to make overdue mortgage payments or cancel the policy on the mortgagee’s behalf because the loan is in arrears.

A. is incorrect because the Standard Mortgage Clause does not create that kind of payment or cancellation right. C. may be something a broker chooses to do as a service step, but it is not “coverage available to the mortgagee.” D. is also incorrect because unpaid mortgage installments are separate from unpaid insurance premium.

From a RIBO perspective, this tests understanding of the difference between property insurance protection and loan repayment/default risk .