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Old 07-07-2022, 05:07   #1
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Boat lender as insurance "loss payee", is it ok?

I'm buying a used boat and planning to finance it. The finance company has told me the insurance for the boat must list the finance company as the "loss payee". I'm not familiar with that in my home insurance (maybe it is there but I'm not aware of it).

Has anyone had issues with insurance claims on financed boats where the money goes to the lender and then its a pain in the ass to get them to actually fund the repairs or other bad scenarios like that? Does the financial contract with the lender stipulate that they will actually use insurance claim $ to repair the boat.

For my home insurance, I filed some claims and money came to me, why would it be different for a boat, or is it?
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Old 07-07-2022, 05:15   #2
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Re: Boat lender as insurance "loss payee", is it ok?

The lender doesn't want to get involved if you have a claim for a repair. They want to make sure if the boat is totaled they aren't chasing you trying to recover money for their asset. They are protecting their interest. The boat is not yours until you pay off the loan. The boat belongs to the bank and you are just the caretaker until it is paid off.

Good luck with the new boat.

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Old 07-07-2022, 05:19   #3
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Re: Boat lender as insurance "loss payee", is it ok?

Quote:
Originally Posted by paulg222 View Post
I'm buying a used boat and planning to finance it. The finance company has told me the insurance for the boat must list the finance company as the "loss payee". I'm not familiar with that in my home insurance (maybe it is there but I'm not aware of it).

Has anyone had issues with insurance claims on financed boats where the money goes to the lender and then its a pain in the ass to get them to actually fund the repairs or other bad scenarios like that? Does the financial contract with the lender stipulate that they will actually use insurance claim $ to repair the boat.

For my home insurance, I filed some claims and money came to me, why would it be different for a boat, or is it?
Its the same as for a home. On your mortgage you'll find the same requirement for them to be listed as the loss payee.
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Old 07-07-2022, 05:30   #4
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Re: Boat lender as insurance "loss payee", is it ok?

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Originally Posted by flee27 View Post
The lender doesn't want to get involved if you have a claim for a repair. They want to make sure if the boat is totaled they aren't chasing you trying to recover money for their asset. They are protecting their interest. The boat is not yours until you pay off the loan. The boat belongs to the bank and you are just the caretaker until it is paid off.

Good luck with the new boat.

Foster
Thanks, I get it, but ok, like I file a claim for some damage (not total loss, but something that needs to be fixed), then insurance company sends check to my finance company ?? and now I need to get them to actually release the funds to me? Is that how it works, because I definitely don't remember that with my home insurance when I got paid for claim for some water damage.

So I guess what I'm hearing is that this is normal, but just wondering what could go wrong here. Do I need to look for something in my finance documents that indicates that they have an obligation to actually release insurance claim funds to me, or what obligates them to do that?
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Old 07-07-2022, 05:40   #5
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Re: Boat lender as insurance "loss payee", is it ok?

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Thanks, I get it, but ok, like I file a claim for some damage (not total loss, but something that needs to be fixed), then insurance company sends check to my finance company ?? and now I need to get them to actually release the funds to me? Is that how it works, because I definitely don't remember that with my home insurance when I got paid for claim for some water damage.

So I guess what I'm hearing is that this is normal, but just wondering what could go wrong here. Do I need to look for something in my finance documents that indicates that they have an obligation to actually release insurance claim funds to me, or what obligates them to do that?
It's typical of most secured loans (boat, house, car, etc..).

If you get it repaired thru an insurance approved vendor, they will likely just pay the lender directly and you will never see the check. If you want to do the repairs yourself, that may draw the bank into it as the bank has a vested interest in making sure you put the money into the asset.
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Old 07-07-2022, 05:41   #6
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Re: Boat lender as insurance "loss payee", is it ok?

This question is best asked of your insurance agent...
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Old 07-07-2022, 06:03   #7
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Re: Boat lender as insurance "loss payee", is it ok?

In a case where someone borrows money to purchase a boat, the lender owns it, not you. Or more correctly stated, you jointly own it.

This is the common method to ensure the lender is paid for their loss. Figuratively speaking, you get to keep whatís left unless the insurance underwriter buys it by total loss declaration.
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Old 07-07-2022, 09:34   #8
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Re: Boat lender as insurance "loss payee", is it ok?

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Thanks, I get it, but ok, like I file a claim for some damage (not total loss, but something that needs to be fixed), then insurance company sends check to my finance company ?? and now I need to get them to actually release the funds to me? Is that how it works, ...

No. Partial damage, money comes to you. Total loss, money goes to Loss Payee and covers the loan first; anything leftover comes to you.

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Old 07-07-2022, 09:40   #9
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Re: Boat lender as insurance "loss payee", is it ok?

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No. Partial damage, money comes to you. Total loss, money goes to Loss Payee and covers the loan first; anything leftover comes to you.

-Chris
Ok, thanks that makes a lot more sense to me. I'll also ask insurance agent to explain.
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Old 07-07-2022, 10:27   #10
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Re: Boat lender as insurance "loss payee", is it ok?

In the case of a total loss, the bank only has a claim on the money up to the remaining balance of the loan. The check may be made out to you and the bank.
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Old 07-07-2022, 10:35   #11
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Re: Boat lender as insurance "loss payee", is it ok?

Just wait until the marina also demands the same thing. That one really shocked me.
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Old 07-07-2022, 10:42   #12
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Re: Boat lender as insurance "loss payee", is it ok?

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Just wait until the marina also demands the same thing. That one really shocked me.


Well to be clear they want to be sure there damage to them gets covered too
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Old 07-07-2022, 11:02   #13
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Re: Boat lender as insurance "loss payee", is it ok?

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Just wait until the marina also demands the same thing. That one really shocked me.
I would never agree to that.
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Old 07-07-2022, 11:02   #14
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Re: Boat lender as insurance "loss payee", is it ok?

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Just wait until the marina also demands the same thing. That one really shocked me.
Marinas usually want to be "named insured" and not loss payee. This protects the marina in the event your boat is liable for damages to something or somebody. As a named insured your insurance covers the marina.

This is a pretty standard request even outside of the marina world. When our YC held events that required a municipal permit or used municipal grounds we would have to have them listed a named insured.
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Old 07-07-2022, 11:08   #15
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Re: Boat lender as insurance "loss payee", is it ok?

A loss payee clause must be added to an insurance policy when collateral such as a motorcycle, car, boat, or home is used to secure a loan. This clause ensures the collateral property and lists the name and address of the lender of the loan in question.

Has anyone had issues with insurance claims on financed boats where the money goes to the lender and then its a pain in the ass to get them to actually fund the repairs or other bad scenarios like that? Never had an insurance claim on a financed OR non-financed boat but insurance claims normally paid to insurer.

Does the financial contract with the lender stipulate that they will actually use insurance claim $ to repair the boat. Propably not but check with your lender.

For my home insurance, I filed some claims and money came to me, why would it be different for a boat, or is it? I expect it would not be any different.
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