Legal Question in Insurance Law in California

It means the lender for the new well loan will become a mortgagee, although in California we technically don't use mortgages; we use deeds of trust. For all intents and purposes that might matter to you, though, they are the same. They are a lien on the property, not ownership. The reason they must be named insureds even if they do not become owners is that it prevents homeowners from just taking off with the insurance money and leaving the lender to foreclose on a worthless house in the event it burns or is otherwise seriously damaged or destroyed. Since the homeowner and the lender would be joint payees on any insurance payout, the homeowner must work with the lender and rebuild or repair the house with the insurance money so that the lender's security interest is preserved.