when listed as a loss payee the lender will receive notification of your insurance policy s status on a regular basis the notifications will inform the lender of all activities on your insurance policy for example the loss payee section of an auto insurance policy creates more than a direct link between your insurance company and your lender 
since you are not the sole owner of the collateral claim checks will be payable to both you and the lender or directly to a repair shop in a total loss the lender will be paid first 3for the lender being listed as a loss payee ensures the lender will be compensated for their collateral regardless of potential losses the loss payee is essentially a safety net for the lender to reduce unpaid loans if you do not list your lender as the loss payee it is probable the lender will put forced placed insurance on your collateral 4