The make-whole doctrine in insurance states that the insurance company cannot retain any portion of a claim settlement unless the settlement amount exceeds the full compensation required for the person who experienced the loss. In other words, the insured individual should receive their entitled amount in its entirety before the insurance company can claim any portion of it.
The make-whole doctrine in insurance states that the insurer will not receive any proceeds from a claim settlement unless specified in the insurance policy. This means that the insured will be fully compensated for their loss before the insurer can receive any funds. For instance, if John has a car insurance policy with a $10,000 limit for damages and the repair costs amount to $8,000, the insurer will cover the full $8,000. However, if the repair costs reach $12,000, the insurer will only pay the policy limit of $10,000, leaving John responsible for the remaining $2,000. The make-whole doctrine ensures that the insured is fully compensated for their loss, protecting them from being undercompensated.
The Make-Whole Doctrine is a legal principle that requires a borrower to pay a lender the full amount of interest that would have been earned if the loan had been held to maturity, in the event of an early repayment or prepayment.
The Make-Whole Doctrine applies in situations where a borrower repays a loan before its maturity date, triggering a prepayment penalty.
A prepayment penalty is a fee charged by a lender when a borrower pays off a loan before its maturity date.
The Make-Whole amount is calculated by determining the present value of the remaining interest payments that the lender would have received if the loan had been held to maturity.
The Make-Whole amount can be waived if the loan agreement explicitly allows for it or if the lender agrees to waive it.
The enforceability of the Make-Whole Doctrine varies by state, as some states have laws that limit or prohibit prepayment penalties.
The Make-Whole Doctrine can be applied to most types of loans, including commercial loans, real estate loans, and consumer loans.
The Make-Whole Doctrine can be negotiated between the borrower and lender, and the terms of the prepayment penalty can be modified or eliminated altogether.
If a borrower refuses to pay the Make-Whole amount, the lender may take legal action to recover the unpaid amount.
The Make-Whole Doctrine can be challenged in court if the borrower believes that the prepayment penalty is excessive or violates state or federal law.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 16th April 2024.
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