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Loss Payee vs. Mortgagee vs. Additional Insured
A mortgagee is a real estate lender named on a property policy with its own protected right to building-loss payments and cancellation notice. A loss payee is a party, usually a lender or lessor on personal property, vehicles, or equipment, that is paid for loss to that specific property. An additional insured is a party added to liability coverage so the policy defends and covers it for claims arising from the named insured's operations or premises.
Last reviewed 2026-10-03 · Our methodology
Why the distinction matters
These designations are often entered on the same "additional interests" screen, and requirement letters sometimes use the terms loosely. But they create different rights on different coverages. Putting a lender in the wrong role can leave it without the protection its loan documents require and delay a closing when the evidence is rejected. For background on the first role, see what a mortgagee clause is.
Side-by-side comparison
| Mortgagee | Loss payee | Additional insured | |
|---|---|---|---|
| Typical holder | Mortgage lender or servicer | Lender or lessor on personal property, vehicles, equipment; sometimes a commercial lender | Lender, landlord, client, or other party with liability exposure |
| Coverage it attaches to | Property coverage on the building | Property coverage on the scheduled item | Liability coverage |
| What it gets | Payment for covered building loss as interests appear; notice before cancellation | Payment for covered loss to the scheduled property as interests appear; notice depends on the clause | Defense and indemnity, within the endorsement's scope |
| Protected if insured voids coverage? | Yes, under a standard mortgage clause, if it meets its conditions | Only under a lender's loss payable-type clause; not under a simple loss payable clause | Not applicable in the same way; scope is set by the endorsement |
The mortgagee
The mortgagee clause is built into most property forms. In the ISO homeowners form (HO 00 03), a named mortgagee is paid for Coverage A and B losses together with the insured "as interests appear," is notified at least 10 days before the insurer cancels or nonrenews, and keeps a valid claim even if the insurer denies the insured's claim, as long as it reports known changes in ownership, occupancy, or risk, pays premium on demand if the insured has not, and files a sworn statement of loss when required.
That independent protection is why investors insist on it. Fannie Mae's Selling Guide (B7-3-08) requires one- to four-unit policies to carry a "standard" or "union" mortgagee clause and states that a loss payable clause in place of a mortgagee clause is not acceptable.
For commercial buildings, the ISO Building and Personal Property Coverage Form (CP 00 10) provides the same type of protection under its "Mortgageholders" condition, including the right to be paid even if the mortgageholder has started foreclosure.
The loss payee
A loss payee is paid for loss to specified property in which it has a financial interest.
On personal lines policies
The ISO homeowners form includes a short Loss Payable Clause: if the declarations show a loss payee for listed personal property, the definition of "insured" is changed to include that loss payee with respect to that property, and the loss payee is notified in writing if the insurer cancels or nonrenews. On auto policies, the bank or finance company on a car loan, or the lessor on a lease, is usually shown as a loss payee or lienholder for physical damage coverage.
On commercial property policies
The ISO Loss Payable Provisions endorsement (CP 12 18) offers several options, and the choice makes a real difference:
- Loss Payable Clause: the insurer adjusts losses with the insured and pays claims jointly to the insured and loss payee, as interests may appear. The loss payee does not get the "survives the insured's breach" protection.
- Lender's Loss Payable Clause: for a creditor whose interest is established by instruments such as mortgages, deeds of trust, security agreements, or financing statements. Like a mortgage clause, it preserves the lender's right to payment when the insured's claim is denied because of the insured's acts, if the lender pays premium on request, files proof of loss, and reports known changes in risk. It also requires advance written notice of cancellation.
- Contract of Sale Clause: for a party the insured has contracted with for the sale of covered property.
- Building Owner Loss Payable Clause: for the owner of a building in which the insured is a tenant.
The endorsement also states that the insurer will not pay any loss payee more than its financial interest in the covered property.
The additional insured
Additional insured status extends liability coverage, not property coverage, to someone other than the named insured. A lender on a commercial loan may face claims from someone injured on the financed property. The ISO endorsement CG 20 18, Additional Insured – Mortgagee, Assignee or Receiver, adds the scheduled lender as an insured on the commercial general liability policy, limited to liability arising out of the ownership, maintenance, or use of the designated premises.
Multifamily programs use both roles together. Freddie Mac's Multifamily Seller/Servicer Guide requires property damage policies to carry a standard mortgagee clause and loss payable clause in favor of Freddie Mac, and requires general liability, umbrella, and excess policies to name Freddie Mac as an additional insured (but not professional liability policies). HUD's Section 232 handbook similarly requires HUD as additional insured on required liability policies, plus a mortgagee clause and lender's loss payable endorsement naming the lender on property coverage.
If a home loan requirement letter asks for the lender as "additional insured" on a homeowners policy, confirm what the lender means; usually it is the mortgagee clause.
What about certificate holders and "additional interests"?
- Certificate holder: the party receiving a certificate of insurance. The current ACORD 28 evidence form states it is issued as a matter of information only and confers no rights on the additional interest named. Being a certificate recipient does not by itself make someone a mortgagee, loss payee, or additional insured.
- Additional interest (notice only): many carriers let you list a party just to receive notices, such as a landlord or condominium association. That gives notice, not payment rights or coverage.
More terms are defined in our glossary.
How to choose the right role
- Read the requirement source: the mortgage, loan agreement, lease, or lender insurance letter.
- Match the coverage: building or real property damage points to mortgagee; personal property, vehicles, or equipment points to loss payee (and for lenders, usually a lender's loss payable clause); injury or liability claims point to additional insured.
- Use the lender's exact name and address. For a mortgagee, members can confirm current clause details on the lender page via search; each listing shows whether it is Verified against a primary source (with the check date) or Pending Verification.
- Issue the matching evidence. See proof of insurance and EOI.
Common mistakes
- Listing a mortgage lender as loss payee instead of mortgagee on a homeowners policy. Fannie Mae does not accept it.
- Choosing the simple Loss Payable Clause when the lender's documents call for Lender's Loss Payable on a commercial policy.
- Adding a lender as additional insured on property coverage, expecting it to function as a mortgagee clause.
- Treating a certificate as coverage. A certificate holder is not an additional insured; the policy or endorsement creates the rights, and the certificate only reports them.
Frequently asked questions
Can a lender be both a mortgagee and a loss payee?
Yes, on commercial accounts it is common. A lender may be the mortgageholder on the building and a loss payee, often under a lender's loss payable clause, on business personal property or equipment it also finances. Each designation should match the collateral described in the loan documents.
Is a lienholder on an auto policy the same as a mortgagee?
No. An auto lienholder is typically a loss payee for physical damage to the vehicle. A mortgagee is a real estate lender named under the mortgage clause of a property policy covering the building.
Does an additional insured get paid for property damage?
Not as an additional insured. Additional insured status provides liability coverage within the endorsement's scope. A party that needs to be paid for damage to property must be designated as a mortgagee or loss payee on the property coverage.
Why won't the lender accept a loss payee designation on a homeowners policy?
Because a simple loss payee generally has no greater rights than the insured. If the borrower's claim were denied, the lender could be left unpaid. A standard mortgagee clause preserves the lender's claim, and Fannie Mae's guide requires it for one- to four-unit properties.
Related resources
For mortgagee wording, read ISAOA and ATIMA explained; to make the change, see adding or changing a mortgagee; for state context, see requirements by state and state pages. Agency plans are on pricing and for insurance agents.
Sources
- ISO Homeowners 3 – Special Form HO 00 03 03 22, Section I Conditions (Mortgage Clause and Loss Payable Clause), as reproduced by FC&S: https://www.propertycasualty360.com/fcs/2022/03/14/homeowners-ho-00-03-03-22-revisions-section-i-conditions-part-7-analysis/
- Fannie Mae Selling Guide B7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements: https://selling-guide.fanniemae.com/sel/b7-3-08/mortgagee-clause-named-insured-and-notice-cancellation-requirements
- ISO CP 00 10 10 12, Building and Personal Property Coverage Form (Mortgageholders condition): https://www.propertyinsurancecoveragelaw.com/wp-content/uploads/2023/12/CP-00-10-10-12-Building-and-Personal-Property-Coverage-Form.pdf
- ISO CP 12 18 06 07, Loss Payable Provisions: https://assets.touchpointmarkets.com/72/2a/24c02656468bbf4bd0644776b3d9/cp-12-18-06-07-loss-payable-provisions.pdf
- ISO CG 20 18 12 19, Additional Insured – Mortgagee, Assignee or Receiver, FC&S analysis: https://www.propertycasualty360.com/fcs/2020/03/10/cg-20-18-12-19-additional-insured-mortgagee-assignee-or-receiver/
- Freddie Mac Multifamily Seller/Servicer Guide, Chapter 31, Insurance: https://mf.freddiemac.com/docs/chapters/mf_guide_ch_31.pdf
- HUD Section 232 Handbook, Section II, Chapter 14, Insurance Requirements: https://www.hud.gov/sites/documents/42321s2c14hsgh.pdf
- ACORD 28, Evidence of Commercial Property Insurance (2016/03), New York DFS approved form: https://www.dfs.ny.gov/system/files/documents/2021/02/acord_28_2016-03.pdf