Loss Payable Clause
Categories: Insurance
The loss payable clause specifies that a third-party (also known as loss payee) receives the funds dispensed for a loss, rather than the individual.
The loss payee will receive the payment because it has a financial interest in the property the claim is made for. Typically, if an insurance company pays out a claim, it pays to the person who holds the policy. You pay for auto insurance. The car gets in an accident. You file a claim. The insurance company sends you a check.
The loss payable clause adds another party into the mix. Instead of paying you directly, the check goes to some third party. Usually, it comes up in a situation where someone has a lien on the insured asset.
You own some property. However, you don't own it outright...you're still paying a mortgage. The property is attacked by a swarm of locusts, destroying its value. You file a claim, but the money doesn't go to you...it goes to the bank that holds the mortgage.
See: Loss Payee.