What is a lender interest?

The concept of lender interest refers to a lender's financial stake in an insured item. When a lender provides financing for a property or another asset, they have a vested interest in that collateral. This interest is typically protected through insurance to ensure that if the asset is damaged or destroyed, the lender can recover their investment. Lender interest is crucial for both the lender and the borrower as it helps mitigate financial risk.

In the context of insurance, understanding lender interest underscores the importance of having appropriate coverage to protect not only the borrower's investment but also the lender's security interest. This clarity helps ensure that in the event of loss, both parties are accounted for in terms of financial recovery.