While the terms Loss Payee and Lender’s Loss Payee may sound similar, there is a difference between them in regards to the insurance protection given the lender in the event of a loss and recovery for the same.
If the lender is properly named (endorsed) as a Loss Payee on a policy and there is a covered loss that occurs for which the insured is entitled to payment, the payment would be made to both. That is, both the insured and lender would be listed on the check.
If due to any non-compliance, wrongful act, or policy provision, the insurance company would not be required to make payment to the insured, then the lender would not receive payment either.
If the lender is properly named (endorsed) as a Lender’s Loss Payable, that is a benefit to the lender. If a covered loss occurs, the lender would have the right to the loss payment, even if non-compliance of terms by the insured or wrongful acts of the insured came into play. The Lenders Loss Payable status and endorsement will also provide that the lender be given notice from the insurance company in the event of a cancellation (non-payment or other reasons) or non-renewal by the carrier.
For more information, contact a knowledge broker.