When you open an insurance policy, you will be listed as the primary policyholder and you will be responsible for paying the premium. However, you may also have the option of adding additional interest or additional insured to the policy. Although these two terms sound similar, they are quite different.
An additional interest is usually an entity that has a financial interest in the insured property, while an additional insured is someone who is jointly covered by the insurance policy, whether it is a car, a house or other property. It is important to understand the difference between additional interest and additional policyholders in case you need to add either to a future policy.
What is the additional interest compared to the additional insured?
In a nutshell, additional interest and additional policyholders are two types of parts that can be added to a single insurance policy.
An additional interest is an entity, whether a person or an organization, that has a direct interest in the insured item. For example, if you are financing your vehicle, you may need to add the lender as additional interest to your auto insurance policy. If something happened to your car or your insurance, the lender would be notified.
An additional insured, on the other hand, is a person who is jointly insured on your policy and who has some financial interest in the insured property. Additional policyholders generally reflect a business relationship between the policyholder and the additional covered party. These types of arrangements appear most often on automobile or home liability and commercial liability insurance policies. For example, if you are making a purchase of land, you can take out a policy on the house or property and list the person from whom you purchased the land as additional insured. If any claims were to be made, you would both receive payment. Additional policyholders can also file claims.
Additional interest and additional policyholders can be added to many types of insurance policies, including auto, home, condo, and tenant insurance.
Understanding the additional interests compared to additional insureds in automobile insurance
Most insurance companies allow you to add additional interest or additional policyholders to a variety of different insurance policies. The main difference between the two is that additional policyholders are covered by the policy and additional interest is not.
Many auto insurance companies use terms such as named insured and registered driver when adding someone else to your policy. The table below explains some of the common auto insurance policy terms that you may come across.
|Named insured||A named insured, or driver, is usually the primary policyholder. They pay the premiums and have full control over the police.|
|Listed driver||A registered driver is someone who lives in your household and is authorized to drive the insured vehicle. They are covered under the terms of your policy when using your car in the event of an incident.|
|Additional insured||An additional insured is a person who is a joint owner of the vehicle under the policy. This person would be covered by claims made on the vehicle and can file claims themselves. Additional policyholders do not need to be listed as drivers unless they drive the vehicle regularly.
For example, let’s say your mom co-owns your vehicle, but you don’t live together. If she doesn’t drive the vehicle regularly, you probably wouldn’t list her as a driver.
|Additional interest||An additional interest is a person or a third party who has a direct interest in the vehicle, such as a lien holder. Additional Interest receives no coverage, but may require that certain types of coverage, such as full coverage, be purchased.|
In most cases, adding additional interest to your insurance policy is unlikely to affect your rate. Common examples of additional interested parties are the co-signers of a leased car or a loan company for financed vehicles.
Adding an additional insured will generally not affect your premium, unless the additional insured is also a driver on the policy. In this case, insurance agents will review the driving record and claim history of any additional insured drivers when you add them. However, noting an additional insured on your auto policy primarily ensures that claim checks will be made out to both parties.
Additional interest vs. additional insureds in other policies
You can add additional interest or additional insured to policies other than auto insurance. Here are some other insurance policies that may have additional insured or additional interest.
With home insurance, there are several reasons why you might want (or need) to add either additional interest or an additional insured to the policy. First, if you have a mortgage, your lender may ask you to record it as additional interest because they technically own the house until you pay off the loan.
Suppose you have a house and your mom has helped you with the down payment and is a co-signer on your mortgage. If your mother moves into the master bedroom suite in your home, you would add her as an additional insured because of her financial stake and the use of the property. This gives both parties the opportunity to file complaints.
Condo insurance is similar to home insurance in many ways. If you have a mortgage or other loan on your condo, you may need to add the lender as additional interest. If you have a domestic partner that you are not married to, they may be added as an additional insured for claim and coverage purposes.
Renters insurance is slightly different from home and condominium insurance because you don’t own the physical building. If your landlord requires you to have home insurance as part of your rental agreement, they may ask to be added to your policy as additional interest. That way, your landlord would be notified if your policy expires. If you live with an adult child, you can register them as an additional insured if you want to be covered by the same policy.
Why is this important
When it comes to additional insured versus additional interest, it is important to know the differences. When you finance a large purchase, like a house or a car, you will likely need to list a lender as additional interest. And, if you’re making a large purchase with someone else, you’ll probably want to add them as an additional insured to extend the same coverage benefits.
Keep in mind that adding additional insureds to your policy could affect your rate, depending on the type of policy. Since both of you would have the opportunity to make claims, you may be affected by the frequency of the additional insured’s claims. Make sure you understand how adding an additional insured could affect your insurance costs, and find ways to lower your premium if necessary.