Lenders often use a Loss Payee designation to protect a lender’s legal interest in property or assets pledged against a loan. A Loss Payee clause is part of an insurance policy that specifies that any loss covered by the insurer would be paid to the Loss Payee holder. The lender — in this case, DreamSpring — holds an interest in the insured’s property.
When clients use collateral to secure a loan, DreamSpring will place a Loss Payee provision on the insurance policy. This protects the loan in the event of damage to the collateralized asset or any claims against that asset. If there is a total loss, the lender is paid out before the owner of the asset by the insurance provider.