Additional Interest vs. Additional Insured: How Do They Differ?

Article Summary:

Additional interest and additional insured are two provisions you can add to an insurance policy that involve third parties. Additional interest is someone who benefits from knowing an insurance policy is in place but doesn’t need the coverage from the policy. On the other hand, an additional insured is named as an insured person on the insurance policy and is given protection under the policy. You commonly see additional interests and additional insureds listed on car insurance, homeowners insurance, condo insurance, and renters insurance policies.

Insurance policies have a lot of moving parts and finer details, making it difficult to know all the options and caveats involved. For example, most of us have insurance for our cars and houses, but what if you need to add other people to those policies? How can you do that without your premium increasing?

Additional interest and additional insured are two ways you can add other people to your insurance policy. Additional interest allows you to add someone to your policy at no additional cost and keeps them aware of changes and updates in your coverage. However, additional insured gives you the ability to protect another person under your policy, although this does come at an added cost.

What is an additional interest?

An additional interest, sometimes referred to as an interested party or a party of interest, is a third party who benefits from knowing that an insurance policy is in place. However, this person doesn’t necessarily need the coverage the policy provides.

Third parties that are added to the insurance policy as an additional interest are notified when changes to the policy are made. These changes can include policy cancellations, lapses in coverage, and renewals, as well as failure to renew the policy. Adding an additional interest to an insurance policy does not increase the premium for the policyholder.

What is an additional insured?

An additional insured is a third party that is added to an insurance policy through an endorsement. When someone is named as an additional insured, they are given protection under the insurance policy and have the right to make claims on the policy.

It costs extra to add an additional insured to a policy, although this cost is typically low because most insurers consider adding additional insureds a marginal cost. If you want to add an additional insured, you’ll have to do so through an additional insured endorsement.

An additional insured endorsement is a change made to a liability insurance policy that extends coverage to others who are not originally named on the policy. This also includes the ability to make claims under the policy.

What are the main types of additional insured endorsements?

There are three main types of additional insured endorsements. These are additional insured as required by written contract, primary and non-contributory, and ongoing and completed operations.

  1. Required by written contract. In some cases, you need written evidence showing that an additional insured is covered under the policy.
  2. Primary and non-contributory. This phrase clarifies how the additional insured is covered. The word “primary” refers to the primary insured and the person (or company) who will respond to an insurance claim first. The term “non-contributory” means that the primary insured is responsible for paying whatever costs exceed the policy’s limit and cannot request the additional insured to contribute.
  3. Ongoing and completed operations. You may see this phrase in an insurance policy that covers a contractor. “Ongoing” indicates that the additional insured has coverage while working on a specific project. “Completed” means the additional insured will continue to have coverage even after work completed.

These endorsements can help protect the additional insured under the named insurer’s policy and allow them to file a claim if they are sued.

What’s the difference between an additional interest vs. additional insured?

It’s important to understand the differences between additional interest and additional insured status, as you may need to add one or the other to a future insurance policy.

The main difference between the two is that an additional interest is a person or entity that has a vested interest in your insured item but is not protected by the policy, while an additional insured is a person who is also protected by your insurance policy. Additional insureds most commonly appear on liability coverage for car insurance or property policies.

What types of insurance policies have these options?

Additional interests and additional insureds can appear on several insurance policies. This includes car insurance, homeowners insurance, and renters insurance.

Car insurance policy

With a car insurance policy, an additional interest could be added to your policy if your car is financed. In most cases, having an additional interest will not make your auto insurance rates increase. Examples of additional interest parties include cosigners on a leased car or a lending company for financed vehicles.

An additional insured on your car insurance policy is anybody with ownership of the vehicle. This will not typically impact your auto insurance rates unless the additional insured is also a listed driver on the policy. If they are listed as a driver, your licensed insurance agent will look at the driving record and claim history of any additional insured drivers when they are added.

If you’re looking for a new policy, or to change from your existing policy, take a look at some of the car insurance companies below.

Homeowners insurance policy

With a homeowners insurance policy, mortgage lenders could request to be added as an additional interest in a homeowner’s policy. Since these lenders would have a personal stake in homes they give out loans for, they want assurance that coverage is in place. This also allows lenders to ensure they aren’t left unpaid in the case of a loss.

As for an additional insured, you would want to list them on the policy if, for example, you have a property that is shared by multiple people who have ownership of it. In this case, each owner should be listed as an additional insured on the policy. This is common in vacation homes or shared family homes.

Pro Tip

It’s a good idea to carefully consider whether you should list a person or company as an additional insured or additional interest on your homeowner’s insurance policy. Depending on the situation, it might allow them to have a claim to ownership or financial interest in your property.

Condo insurance

Condo insurance is considered to be similar to homeowners insurance in many ways. For example, if you have a mortgage or other loan on your condo, you may have to add the lender as an additional interest.

Additionally, if you have a domestic partner that you aren’t married to, they can be added as an additional insured for both claim and coverage purposes.

Renters insurance policy

Things are slightly different for a renters insurance policy because you won’t be the actual property owner. Your landlord might request to be added as an additional interest on your policy if they require tenants to have renters insurance. This way they can receive notifications alerting them that your policy will lapse soon.

If you have an adult child or other relative living with you, listing them as an additional insured would allow you both to be covered by the same policy. Try comparing the offers below to see what your policy terms may look like.

FAQs

What is the difference between an insured and an additional insured?

An insured is entitled to all of the benefits and coverage provided by the insurance policy. An additional insured, on the other hand, is someone who is not the owner of the policy but who may be entitled to some of the benefits and a certain amount of coverage under the policy. However, this is only under certain circumstances.

Who should be listed as additional insured?

An additional insured can be anyone the insurance policy owner wants to have protection under the insurance policy, and the right to make claims on the policy. For example, if you’re the part-owner of a vacation home along with several other people, you’ll want all of them listed as an additional insured. This way everyone will be protected should something happen to the house.

Why be named as an additional insured?

It’s useful to be named as an additional insured because it protects you if something were to happen to the insured item that you have ownership of or claim to.

Key Takeaways

  • An additional interest is a third party who benefits from knowing that an insurance policy is in place, but doesn’t need the coverage the policy provides. They can be added to your policy at no extra cost.
  • An additional insured is a third party that is added to an insurance policy through an endorsement. They are given protection and have the right to make claims under the insurance policy. Though you may see an increase in your premium if you add an additional insured, the cost is relatively low.
  • An additional insured endorsement is a change made to a liability insurance policy that extends coverage to others who are not originally named on the policy.
  • Car insurance, homeowners insurance, condo insurance, and renters insurance are the main types of policies where additional interests and additional insureds can be added.
View Article Sources
  1. National Flood Insurance Program Claim Forms for Policyholders — Federal Emergency Management Agency
  2. Understanding Your Insurance Policy — South Carolina Department of Insurance
  3. Can I Insure a Car Not in My Name? — SuperMoney
  4. What is Covered Under Flood Insurance – A Complete Guide — SuperMoney
  5. What is Term Life Insurance? And Why Is Everyone Suddenly Interested — SuperMoney
  6. Do Red Cars Cost More to Insure? — SuperMoney
  7. Best Auto Insurance Companies | August 2022 — SuperMoney
  8. SuperMoney’s Expert Insurance Guide — SuperMoney