Loss Payable Clause

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Definition - What does Loss Payable Clause mean?

A loss payable clause is a provision in an insurance contract that authorizes a claim payment, in the event of the occurrence of the risk insured, to a third party, instead of the insured person.

A loss payable clause is also called loss payee clause.

Insuranceopedia explains Loss Payable Clause

A loss payable clause is commonly found in personal and commercial auto policies, maritime insurance, and commercial property policies. More specifically, it is usually provided in insurance policies wherein the property insured is mortgaged or subject to other security interest. It serves as a protection to lenders who have leased their property or extended credit to the insured. Therefore, for a loss payable clause to be valid, the third party to whom payment is made must have an insurable interest in the in the property concerned. The third party involved is called the loss payee.

Under a loss payable clause, the loss payee may not receive payment from the insurer if a claim is denied. In the event that payment is made to the loss payee, the insurer acquires the relevant rights of the loss payee.


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