With any insurance policy, there will always be a primary policyholder –perhaps it’s you and why you are reading this post. The primary policyholder is usually the person with their name on and ownership of the insurance policy. They can make any changes they see fit and oversee any claims process.
Primary policyholders are also able to add people referred to as additional insured and additional interest to the policy. While both sound interchangeable, an additional insured is much more different than an additional interest on an insurance policy.
What is an Additional Interest?
An Additional Interest in automobile insurance refers to a third party listed on an insurance policy. It possesses a certain degree of interest or stake in the vehicle but is not the primary insured party.
Typically, this could be a lienholder, such as a financial institution with a financial interest in the vehicle due to a loan or a lessor in the case of a leased car. Including an Additional Interest on an insurance policy ensures that this entity is notified in the event of any changes to the policy, including cancellations or lapses in coverage.
This arrangement protects the financial interests of the Additional Interest, as they may suffer a loss if the vehicle is damaged or destroyed and not adequately insured. It is crucial to differentiate that while an Additional Interest is informed about the policy status, they do not receive the insurance benefits directly and are not covered parties in terms of policy claims.
What is an Additional Insured?
An Additional Insured refers to a person or entity that is not the primary insured but is added to an insurance policy at the request of the named insured. This is a common practice in various insurance sectors, including auto insurance. Inclusion as an
Additional Insured extends specific coverage and protection under the policy to this third party, often related to particular risks, activities, or locations associated with them.
For instance, in car insurance, a company leasing a vehicle may be listed as an Additional Insured on the lessee’s policy, thus affording them protection under the policy’s provisions. This status differs from being a mere additional interest or loss payee, as the Additional Insured gains actual coverage under the policy, typically limited to liability arising from the named insured’s conduct or ownership of the insured item.
It’s a strategic risk management tool, safeguarding the Additional Insured against certain risks while maintaining the policy’s primary focus on the named insured.
Additional Insured vs. Additional Interest
The short answer is that what makes additional insured, and additional interest different is that the additional insured would be someone who is added to the policy and is entitled to all the listed coverages. An additional interest would be someone or a group with financial interests in whatever is insured– a home or a car.
A specific example of an additional insured would be someone living or working with you who is put on the policy because they need the same insurance as you do and qualify for it.
Those living in the same households are typically allowed to be on the same car insurance policy as the car owner since they may use it regularly. Housemates and roommates can be added as additional insured under a homeowners' or renters' policy. Co-workers may also be listed as additional insureds on a work vehicle’s auto policy.
Meanwhile, the prime example of an additional interest on an insurance policy would be a car financing company. This is because they have a financial interest in the car as it’s being paid off. This can also be the case for those who lease commercial property from one such entity.
The additional interest will be in the know whenever damages occur, or a claim is filed. If your car, which you are currently financing, is totaled, you may be on the line for any remaining payments. However, some insurance coverages can insure you against such damages.
How Are Additional Insured And Additional Interest Listed in an Insurance Policy?
Let’s look into how an additional insured or another interest will appear on a car or homeowners' insurance policy. As previously mentioned, cars under a finance plan or lease usually require an additional interest because the party providing the vehicle is the owner until the car is fully paid off.
These lending and finance companies will often require drivers of their cars to have full car insurance for the exact reason we just went over –the vehicle gets totaled in an accident and needs to be fully paid off. An insurance agent from your car insurance company will always be in contact with the leasing company until it is otherwise done so.
The most common reason an additional interest may appear on any property or residents' insurance is a mortgage. In that case, the lending company or party would be listed on the homeowners' policy until it’s paid off. Meanwhile, an additional insured may be listed on a homeowners' policy if a housemate or other property owner is a co-signer on said mortgage. They could also file claims if the primary policyholder isn’t present.
Other living spaces like condos and apartments have insurance policies similar to homeowners'. A condo can also have a mortgage or a lender attached as an additional interest like a home would, with anyone living there as a co-signer or resident being listed on the policy as additional insured.
Meanwhile, renters' insurance is more orientated for property and assets protection since the landlord is the party that owns the space. Some landlords request to be listed as an additional interest on a renters insurance policy as the property owner. Again, any roommate or co-signer on the lease agreement should also be an insured party.
Why are Additional Insured and Additional Interest Important?
Having additional insureds and additional interests for any insurance policy is all about maximizing protection and extending it to anyone else who may need it. At the same time, it may be a requirement from those with actual ownership or insurance companies.
Understanding and appropriately applying Additional Insured and Additional Interest in auto insurance policies is essential for thorough risk assessment and management. These roles help define the coverage and responsibilities among the involved parties, thereby preventing potential legal disputes and financial losses.
It’s always a good idea to extend something as liability coverage or property damage to someone who frequents or owns your car or home.
