What is the difference between loss payee and certificate holder

Vendors: Sales: Don't see your industry? Contact us for more information. Our automated tracking software will take the worry and frustration out of organizing stacks of insurance documents. Get your organization up to speed by taking advantage of some of our most popular resources, created especially for you. On the surface, loss payees and additional insureds may seem similar. The two are actually quite different in their scope and coverage. A loss payee is a third-party entity entitled to insurance payments for damage to items of insurable interest.

This authorization is obtained by adding a loss payable clause on the declarations page, which may transfer all or some of the total payment to the loss payee. Loss payable endorsements are most common when a third party owns or partially owns the physical property in question. For example, a bakery leases a commercial oven. It may add the party from which it leases the oven as a loss payee to its commercial property policy.

If a fire breaks out in the kitchen and damages the bakery, both parties would receive payment based on their insurable interest in the affected property.

An additional insured is typically a person or entity with liability exposure as a result of their relationship with the insured. The named insured can usually include an additional insured under their liability policy to extend some degree of coverage to that party.

This may be done to comply with a contract or to protect another person or entity with whom you have a close relationship. Most often, the larger entity leverages their bargaining power to require a smaller company to list it as an additional insured. This endorsement is also frequently used in conjunction with an indemnity clause as an extra layer of protection for the indemnitee. Each status — Certificate Holder, Additional Insured, and Loss Payee — has a specific meaning and each confers specific rights.

A Certificate Holder is an entity that receives a Certificate of Insurance from an insurer to evidence the type and amount of coverage afforded to the insured. Certificate Holders are typically provided notification of changes in coverage or cancellation of coverage.

Shippers, brokers, and carriers should always request Certificate Holder status from downstream service providers. Shippers should request Certificate Holder status from brokers and carriers, and brokers should request Certificate Holder status from carriers. Carriers should request Certificate Holder status from independent contractor drivers that obtain their own insurance. If you are the insured, you may not want to add another entity as Additional Insured because your premium may increase.

However, if you value your relationship with the entity or have agreed to defend the entity under an indemnification clause, you want to be sure the entity is an Additional Insured on the policy. Yes, with auto insurance there is a difference between a loss payee and a certificate holder. A loss payee is a person or entity with a legally secured insurable interest in another's property, usually a financial institution that loaned money to buy a car. The car is the loan collateral.

If the auto is damaged in an accident, loss payments will be made to you the policyholder and to the loss payee on your policy. With a certificate holder the certificate states in writing to the certificate holder that the Named Insured you, the policyholder has the specific coverage and limits listed on the certificate. It does not grant insurance coverage to the certificate holder. It only states that you have the specified coverages.