The loss payee and a lienholder may be separate entities. Or they may be both. It may sound confusing, but there’s a reason for this contradiction. 

Let’s take a look at their similarities and differences. 

What is a Lienholder?

A lienholder is a person or organization with a financial interest in property up to the amount of money borrowed or still owed on the property.

Examples of a lienholder: 

  • Bank
  • Finance company
  • Credit union 
  • Another party to whom funds are owed as payment for the property

What is a Loss Payee?

A loss payee is a person or entity with a legally secured insurable interest in another's property. This is usually a financial institution that loaned money to buy a car. The car is the loan collateral. If the auto is damaged in an accident, loss payments will be made to you and your policy’s loss payee.

Examples of a loss payee:

  • Vehicle co-owner or-co signer who has an insurable interest in the property
  • An individual with whom a financial agreement has been made securing the property as collateral, such as a personal sale or a temporary personal loan
  • A financial institution like a bank or a finance company who loaned the funds for the purchase


Comparing Lienholder vs. Loss Payee

Here’s the difference -- the loss payee doesn’t have to own the property.  They simply have an insurable interest in it. A lienholder owns the property until the property is paid off. 

For this reason, a lienholder may also be considered a loss payee. Be sure to list a loss payee on your car insurance policy if there’s a lienholder or an insurable interest on your vehicle.

When you finance or lease a vehicle, you will be required to carry types of car insurance other than the minimum liability limits required by your state. Your lienholder or leasing company will require that you carry physical damage coverage of collision and comprehensive.  

The best way to make sure that you receive the best rates is to compare car insurance rates with multiple insurance providers.