What Is a Loss Payee in Business Insurance?

A loss payee is one of many insurance terms worth understanding, so you can make informed choices when insuring your profession or business. There is what’s known as a loss payable clause in your business insurance policy on the declarations page. Under that clause, it lists any loss payees on your policy.

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For example, if you purchase a commercial property and have a mortgage, the financial lender providing you with a mortgage is automatically listed on your policy as a loss payee. Therefore, if a fire destroys the property and it is determined by your insurance provider to be a total loss, payment is made to the financial lender first up to your policy’s coverage limit. If there is still a balance owing on the mortgage after the lender receives full payment from your insurance provider, you are responsible for paying the outstanding amount.

What Is the Difference Between a Loss Payee and an Additional Insured?

The main difference between a loss payee and an additional insured is the type of protection each receives from your policy. 

A loss payee gets property damage coverage, and an additional insured only gets liability protection. Therefore, a loss payee does not receive liability coverage from your policy, and an additional insured doesn’t receive funds from a property damage claim.

Although your insurance provider is required to inform the loss payees of any claims or changes to your policy, they do not have any control over the policy and cannot file claims or make changes to it. Only you, as the policyholder, can do that.

Meanwhile, an additional insured is a person or organization you can add to your policy that you have a relationship with either as an employee or business partner. By doing so, some of your policy’s liability coverages also extend to protect them.

For instance, if you rent or lease a commercial property for your retail business, your landlord will typically ask to be included on your insurance as an additional insured. If one of your customers suffers an injury from a slip and fall accident on the premises, and the customer sues you for damages, your insurance will protect you and the landlord.

How to Add a Loss Payee or Additional Insured to Your Policy

If you want or need to add a loss payee or additional insured to your business insurance policy, speak to a Zensurance broker. It’s not difficult to do, but there are a few things that need to be considered, such as:

• Does your policy allow you to add loss payees or additional insureds? If so, what endorsements or riders does it include? You may need to add an endorsement to do so.
• Is it in your best interest to add a loss payee or additional insured to your policy, and will doing so increase the cost of your annual premium?
• Does your existing policy provide adequate coverage for your business and a loss payee or additional insured?
• If a loss payee is listed on your policy and you wish to add another, you may require the approval of the existing loss payee first.

Business insurance can be confusing to understand, but that’s where we come in: Zensurance makes getting the protection you need easy, affordable, and straightforward. 

Fill out an online application to get a free quote. Through one of more than 50 insurance providers in our partner network, we can quickly find and customize the policy you need so you can focus on growing your business.