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When it comes to insurance policies, industry jargon can be confusing. Two common terms that often come up are “additional interest” and “additional insured.” While they may sound similar, they actually refer to different parties named in an insurance policy. In this article, we dive into the definitions of additional insured vs. additional interest and how they apply to different types of insurance policies.
What is additional interest vs. additional insured?
The short answer is that additional interests and additional insureds are parties that can be added to a single insurance policy. Both additional interests and additional insureds can be added to multiple types of insurance policies, including auto, home, condo and renters insurance. The major difference is why the parties are being added to the policy.
What is an additional interest?
An additional interest is an entity, either a person or organization, that has some vested interest in the insured item. For example, if you finance your vehicle, you may be required to add the lender as an additional interest to your car insurance policy. If something were to happen to your car or your insurance lapsed, the lender would be notified.
What is an additional insured?
The term ‘additional insured’ refers to a person or entity that is not initially included in the insurance policy but is later added to it, thereby extending the policy’s coverage to them. This person or entity typically shares a business relationship with the primary policyholder and has some financial stake in the insured property.
An additional insured can be anyone who could potentially face legal action due to an incident involving the insured’s property in question, such as:
- The co-owner of the vehicle
- A landlord
- An employer
By being added to the policy, the additional insured receives protection against these specific risks, reducing their potential financial liability.
This coverage, however, is often more limited than that for the primary insured and is tailored to specific risks associated with the relationship between the parties involved. The most common example is a lending or leasing company. When you get a vehicle loan or lease, you are not the owner of the car, so the company is included in your insurance policy as an additional insured until the lease is over or you pay off the loan. The lender usually requires the policy to maintain certain coverage limits.
Who can be listed on a car insurance policy?
Generally, anyone who has an insurable interest in the vehicle can be listed on the policy. This could include the primary driver, other household members who drive the vehicle, and even a lienholder or a co-signer.
However, the type of interest they have in the vehicle can vary significantly, and this is where the terms additional interest and additional insured come into play. It’s important to keep in mind that there isn’t a separate additional interest insurance policy, but an additional interest or additional insurance clause or endorsement added to the existing auto insurance policy.
Most insurance carriers allow you to add additional interest or additional insured parties to a variety of different insurance policies. The main difference between these two is that additional insureds are covered under the policy and additional interests are not.
Many car insurance companies use terms like named insured and listed driver when you add another person to your policy. The table below explains some of the common terms related to auto insurance policies that you may come across.
| Term | Meaning |
|---|---|
| Named insured | A named insured, or driver, is usually the main policyholder. They pay the premiums and have full control over the policy. |
| Listed driver | A listed driver is someone who lives in your household and is permitted to drive the insured vehicle. They are covered under your policy’s terms while using your car should any incidents arise. |
| Additional insured | Someone who jointly owns the vehicle on the policy. This person would be covered by claims made on the vehicle and can file claims themselves. Additional insureds don’t necessarily have to be listed as drivers unless they drive the vehicle regularly. For example, say your mom is the co-owner of your vehicle, but you don’t live together. If she doesn’t drive the vehicle regularly, you would likely not list her as a driver. |
| Additional interest | A person or third party who has a vested interest in the vehicle, like a lienholder. An additional interest receives no coverage, but can request that certain coverage types — like full coverage — be purchased. |
Will adding an additional insured affect my auto premium?
In most cases, adding an additional interest to your insurance policy will not impact your rate. Common examples of additional interest parties are co-signers on a leased car or a lending company for financed vehicles.
Adding an additional insured should not impact your premium unless the additional insured is also a listed driver on the policy. In that case, insurers will look at the driving record and claim history of any additional insured drivers when you add them. However, noting an additional insured on your auto policy mainly ensures that claim checks will be made out to both parties.
Additional interest vs. additional insured in other policies
You can add an additional interest or an additional insured to policies other than car insurance. Here are some other insurance policies that can have an additional insured or additional interest attached to them.
Homeowners insurance
With homeowners insurance, there are a few reasons why you might want (or need) to add either an additional interest or an additional insured to the policy. First, if you have a mortgage, your lender might require you to list them as an additional interest because they technically own the home until you pay off the loan.
Say you have a home and your mom helped you with the down payment and is a co-signer on your mortgage. If your mom moves into the mother-in-law suite of your home, then you would add her as an additional insured due to her financial stake and usage of the property. This gives both parties the opportunity to file claims.
Condo insurance
Condo insurance is similar to home insurance in many ways. If you have a mortgage or other loan on your condo, you may have to add the lender as an additional interest. If you have a domestic partner that you aren’t married to, they may be added as an additional insured for claim and coverage purposes.
Renters insurance
Renters insurance is slightly different from home and condo insurance because you do not own the physical building. If your lease agreement requires renters insurance, your landlord might ask to be added as an additional interest renters insurance on your policy. This way, your landlord would be notified should your policy lapse. However, adding a landlord to a renters insurance policy is not common and is not required by law. If you have an adult child that you live with, you could also list them as an additional insured if you want to be covered under the same policy.
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