To whom may the insurer pay proceeds under a loss payable clause?

• A. Only named insured
• B. A party (other than named insured) who has a security interest in the insured property
• C. The insurer's choice
• D. The mortgage lender only

Answer: (B)

A loss payable clause designates who will receive the insurance proceeds when a loss occurs, to protect a party who has a financial interest in the property. It typically names a lender or other lienholder as the recipient of the claim funds so that the debt tied to the property can be satisfied first. This means the insurer may pay the proceeds to a party other than the named insured, provided that party has a security interest in the insured property. This arrangement helps ensure the loan or lien is protected even if the property is damaged.

The other options don’t fit because the clause isn’t at the insurer’s discretion, and it isn’t limited to the named insured or to mortgage lenders only; it can apply to any party with an insurable interest who is named as the loss payee.