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The end of law is not to abolish or restrain, but to preserve and enlarge freedom.
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Legal Definitions - loss payee
Definition of loss payee
A loss payee is an individual or organization specifically identified in an insurance policy who is entitled to receive payment directly from the insurer if the insured property is damaged or destroyed. This designation is typically made when the loss payee has a financial interest in the insured property, such as a lender who has provided a loan for the purchase of the property.
Example 1: Car Loan
Imagine Sarah buys a new car and finances it through "First National Bank." As part of the loan agreement, the bank requires Sarah to obtain comprehensive car insurance and to name "First National Bank" as a loss payee on her policy. If Sarah's car is later totaled in an accident, the insurance company will pay "First National Bank" directly for the outstanding loan amount before any remaining funds are disbursed to Sarah. This arrangement protects the bank's financial interest in the vehicle.
Example 2: Home Mortgage
John and Emily purchase a house with a mortgage from "Community Credit Union." Their homeowner's insurance policy lists "Community Credit Union" as a loss payee. If a severe storm causes significant damage to their home, the insurance company will issue the payment for repairs or reconstruction directly to "Community Credit Union" (or jointly to the credit union and the homeowners). This ensures that the lender's security interest in the property is protected and that funds are used to restore the asset securing the loan.
Example 3: Leased Business Equipment
A construction company, "BuildRight Inc.," leases several pieces of heavy machinery from "Equipment Finance Solutions." The lease agreement stipulates that "BuildRight Inc." must insure the equipment and name "Equipment Finance Solutions" as a loss payee on the policy. If one of the leased excavators is stolen or irreparably damaged, the insurance payout will go directly to "Equipment Finance Solutions" to cover the remaining value or lease obligations. This safeguards the finance company's investment in the leased assets.
Simple Definition
A loss payee is a person or entity specifically named in an insurance policy. They are designated to receive payment directly from the insurer if the insured property is damaged or destroyed. This arrangement ensures that the loss payee's financial interest in the property is protected.