In the insurance provision, who should be named as the loss payee?

• A. The lessee.
• B. The insurer.
• C. The lessor.
• D. The borrower.

Answer: (C)

The loss payee should be the party who holds the ownership and security interest in the asset, so that insurance proceeds protect the lender’s or owner’s collateral. In a lease or financed arrangement, the lessor owns the asset or holds the lien, making them the party whose financial interest is at stake if the asset is damaged. Naming the lessor ensures the insurer’s payments are applied to repair or replace the asset and satisfy the loan or lease obligations, preserving the collateral. The lessee or borrower does not own the asset, so having them as loss payee wouldn’t safeguard the creditor’s security, and naming the insurer would divert funds away from the purpose of the policy.