Florida Insurance Claims Adjuster License Practice Exam

What is the purpose of the Loss Payee Clause in an insurance contract?

1. To ensure the insurer profits

2. To prevent any payment

3. To make payment to a third party

4. To insure international risks

The correct answer is: To make payment to a third party

The purpose of the Loss Payee Clause is to ensure payment is made to a third party, typically a lender or financial institution, in the event of a covered loss. Option A is incorrect because the primary purpose of insurance is to protect against financial loss, not to guarantee profits. Option B is incorrect because insurance contracts are designed to provide financial protection, not prevent payment. Option D is incorrect because a Loss Payee Clause is typically found in domestic insurance policies, not international ones.