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Simple English definitions for legal terms
loss-payable clause
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A quick definition of loss-payable clause:
A loss-payable clause is a part of an insurance policy that allows the payment of money to someone other than the person who bought the insurance. This is usually someone who has a security interest in the property that is insured. The clause can either make this person a beneficiary of the money or give them a claim against the insurance company. However, this person is not considered an additional insured under the policy. It is similar to a mortgage clause.
A more thorough explanation:
Definition: A loss-payable clause is a provision in an insurance policy that allows the payment of the insurance proceeds to someone other than the named insured. This is usually someone who has a security interest in the insured property.
For example, if you have a car loan, the bank may require you to have car insurance with a loss-payable clause. This means that if your car is damaged or stolen, the insurance company will pay the bank the amount owed on the loan before paying you any remaining amount.
Another example is if you rent a property and your landlord has a mortgage on the property. The landlord may require you to have renters insurance with a loss-payable clause. This means that if the property is damaged or destroyed, the insurance company will pay the landlord the amount owed on the mortgage before paying you any remaining amount.
The loss-payable clause is important because it protects the interests of the person or entity with a security interest in the insured property. It ensures that they will receive payment before anyone else if the property is damaged or destroyed.