Loss payable clauses of insurance contracts

What is the loss payable clause?

The loss payable clause is used by the creditor as a means of protection of the property for which it lent funds to the debtor. Loss payable clauses therefore mean the blockage of payment of the insurance benefit, mostly in favour of the insurance creditor. It is often used in mortgage loans, where the insurance benefit is blocked in favour of the bank which provided the loan. The loss payable clause may be added to the policy only with the insured’s consent. 

How is insurance policy blocked and what do I have to evidence?

The loss payable clause relates to items for which the insurer borrowed money from the bank and thus relates to claims where the insurance benefit is paid directly to the bank. Should the client wish to add a loss payable clause to the insurance contract, a special form (each bank has its own) for adding such clauses must be completed.

This completed form must be sent to the insurance company’s address: Maxima pojišťovna a.s., Italská 1583/24, 120 00 Praha 2 Vinohrady (the insurance company will send you the confirmed form back for free) or submitted in person at any branch or the company’s headquarters. The loss payable clause can only be applied if the insurance policy is paid.