A Loss Payee Clause provides that payment will be made to which party upon a covered loss?

• A. The insured
• B. The insurer
• C. A third party designated in the clause
• D. The mortgagee exclusively

Answer: (C)

A Loss Payee Clause designates a third party with an interest in the property who will receive the insurance proceeds when a covered loss occurs. This protects someone like a lender or another creditor who has a financial stake in the property. Because of this clause, the insurer is required to pay the designated loss payee directly, ensuring the lien or obligation is addressed before funds flow to the insured if needed.

So the best choice is the third party named in the clause—the loss payee. This is often the mortgagee or another creditor, but it isn’t limited to one specific party; the key idea is that the payment goes to the designated third party with a real financial interest. The insured is not automatically the recipient under this clause, and the insurer’s role is to pay according to the clause to protect the named party’s interest. The option stating the mortgagee exclusively is too narrow, since a loss payee can be any designated third party with an insurable interest.