An additional insured is a person or other third party that is added to an insurance policy in order to be provided with coverage. For example, if four people own property, the policyholder would be the main named insured, and the other three parties would be covered as additional insured.
An additional interest, on the other hand, is a party that is not covered by the insurance but holds an interest in the property. For example, a mortgage company is often named as an additional interest, as they hold the title to a home or vehicle since they lent the money to you to buy it.
When these terms are used, they can combine with others to slightly change their meaning or affect the policy in a different way. Below we outline some common scenarios for each to give you a deeper understanding of how they work and differ.
- An additional insured is an additional owner of a property or asset who will be covered under the insurance policy.
- An additional interest is a party that has a financial stake in the property but is not an owner.
- Additional insured parties can file claims while parties of additional interest cannot.
Common examples of additional insured
There are a few different types of policies where you may see an additional insured. This is because this term is used in a wide range of policies and circumstances. Below are some common examples of its use.
Additional insured for homeowners insurance
If you were to buy a home, and a member of your family assisted you as a co-payee, then they would be listed as an additional insured person on the homeowners insurance. This is because they put money toward the home and therefore own a partial part/financial interest in said home.
This is beneficial because both people listed as owners on the home or mortgage will be able to file claims on the property. If the family member was left off the policy, they would not be able to file a claim, even if you were out of the country or moved off-premise.
Additional insured for condo insurance
Similar to a homeowners policy, a condo HO-6 insurance policy can also have an additional insured name. If you and a friend purchase a condo together, you will both be listed on the deed as owners of the property. When buying insurance, you will both want to be listed so that claims can be filed by either party.
In order to make this happen, the main policyholder must add the second party onto the insurance to make them additional insured. Without this listed, the second owner will not be protected by the insurance company.
Additional insured for renters insurance
In most cases, it is not a good idea to have an additional insured on your renters policy. The only time you should have one is if you have a roommate or significant other who pays part of the rent.
Some landlords try to have tenants list them as additional insured, but this can cause issues for the renter in the long run. This is because if a landlord is listed as an additional insured, they cannot make a claim against the insurance for themselves. This means the renter might be liable for all costs out of pocket.
Additional insured for auto insurance
If you lease a vehicle, you will likely need to list an additional insured on the insurance policy. This is because, as a party leasing the vehicle, you do not own the vehicle, the company you are leasing from owns it.
This allows the leasing company to receive payment for the vehicle if something were to happen to it. If you were to leave them off the policy, you would be liable for the damages and replacement of the vehicle.
This term should not be confused with Listed Driver. Although a listed driver will be allowed to use your vehicle, and it would cover a claim if something were to occur while they use the vehicle, it does not allow them to submit such a claim or give them authority over the policy.
In each case, an additional owner will likely be the additional insured on a policy. This protects their financial stake in the property or asset that is acquired through a loan or other means. It also allows them the ability to file claims.
Common examples of additional interest
Having an additional interest in the tangible property is beneficial for anyone with a financial interest in the property. It protects them from being left out of payment on a loan or mortgage if something happens to the property at hand. Here are some common scenarios in which an additional interest is used.
Additional interest for homeowners insurance
Mortgage agencies or other agencies that provide loans to secure a home require that they are listed as a party of additional interest. This means that they will be guaranteed payment if something happens to the home. For example, if a house burns down, the mortgage does not go away. The mortgage company will receive their lump sum to cover the money owed to them.
Additional interest for condo insurance
Like homeowners insurance, condo insurance can have an additional interest listed. In many cases, this is the lender that provides the mortgage for the property. This allows them to be paid out in the case of a claim or other financial instance.
Additional interest for renters insurance
Some landlords request that their tenants name them as an additional interest on their renters policy. This allows the landlord to see whether or not a change has been made to the policy and whether or not the tenant has the appropriate coverage. The landlord cannot file a claim and has no legal authority as an additional interest.
Additional interest for car insurance
If you have acquired your vehicle through a car loan, then the lender will be named as an additional interest. This ensures that the lender is paid for the outstanding balance on the loan should something happen to the vehicle and it is determined to be totaled. It also verifies that the vehicle can be fixed after an accident, which further protects the financial interest of the lender.
In each of these instances, the additional interest is typically a lender or other party who wants assurance that a property or asset is insured and protected in case of loss or damage. This is often also due to the fact that the party of interest will be able to recoup their investment should the unfortunate occur.
Be sure to know the difference
It is important to understand the difference between an additional insured and an additional interest. This allows you, as the policyholder, to determine who has access to make a claim and who has access to payment if an asset is destroyed.
