TBH I'm not sure about the ins and outs, just know that someone else pulled it off, got the house paid out for free and no grief. But you're right, you'd want to check it out pretty carefully beforehand, read all the fine print. Maybe it depends on which insurance company it is?

Does his friend at the bank know what his situation is? MIght be worth asking the friend to put his thinking cap on, find out if there is anything that can be done to help, even if it's a little bit outside the usual, kwim? Your DP sounds like a pretty amazing person, I'm sure people will want to help him however they can.