Georgia Property & Casualty Practice Exam

Which clause ensures that a loss payee will be included in any claim payment related to insured property?

1. Loss payable clause

2. Mortgage clause

3. Additional insured endorsement

4. Bailee provision

The correct answer is: Loss payable clause

The loss payable clause is a specific term within insurance policies that guarantees a designated loss payee receives payment in the event of a covered loss to the insured property. This clause is critical in situations where a third party, such as a lender or finance company, has a financial interest in the property. By including this clause, the insurer legally acknowledges the loss payee's right to receive payment, which ensures that their financial interests are protected. In contrast, the other options do not serve the same purpose. The mortgage clause pertains specifically to mortgages and protects the mortgage lender's interest in the property; it may differ from a loss payee arrangement. The additional insured endorsement extends coverage to other parties but does not guarantee payment to them in the event of a loss. Similarly, the bailee provision addresses the responsibility of a bailee for the property entrusted to them but does not involve claim payment mechanisms for loss payees. Thus, the loss payable clause is uniquely designed to facilitate a claim payment to designated parties in connection with insured property losses.