A loss payee and a lienholder are people or companies with a financial stake in your vehicle. In many cases, they are the same. The loss payee or lienholder is named on your insurance policy because if the car is a total loss, some portion of the claim payout belongs to them.

Read on to learn what each term means and how they differ. 

What is a lienholder?

A lienholder is a person or organization that has provided a loan for a major purchase and is still owed money on that loan. In the event of a total loss on a car, the portion of the loan still owed would be paid to the lienholder.

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 (or a lienholder, which is why they are often the same). The car is the collateral. Loss payments will be made to you and the loss payee listed on the policy if it’s totaled in an accident.

The loss payee may also be someone who co-signed on the car loan.

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 that loaned the funds for the purchase


Lienholder vs. loss payee: What’s the difference?

The main difference is that the loss payee doesn’t have to have an ownership stake in the property.  They have an insurable interest in it. A lienholder owns the property until the loan is paid off. 

A lienholder may also be considered a loss payee and will require that it be listed on the insurance policy as part of the loan agreement.

When you finance or lease a vehicle, you must also carry specific types of car insurance beyond the minimum liability limits required by your state. Your lienholder or leasing company will require that you have physical damage coverage of collision and comprehensive.

Review the terms of your loan to ensure you’re meeting all the requirements.