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Understanding an insurance policy can feel tricky, but there are certain factors that stay the same across car, homeowners and other property insurance. For example, when you buy an insurance policy, you’re listed as the main policyholder and are required to pay the premium, no matter what type of policy it is. What may differ, however, is the option to add an additional interest or an additional insured to your policy.
While the terms additional interest and additional insured may sound similar, they aren’t. They’re actually quite different. When it comes to insurance, an additional interest is an entity with a financial interest in the property you’re insuring, whether it’s a car, a home or another type of property. An additional insured, on the other hand, is someone who is also covered by the insurance policy you purchased. It’s important to understand the difference between additional interest vs. additional insured, as you may need to add one or the other to a policy in the future.
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.
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.
An additional insured, on the other hand, is a person who is jointly insured on your policy and has some financial stake in the insured property. Additional insureds usually reflect a business relationship between the policyholder and additional covered party. These types of arrangements most commonly appear on liability and commercial auto or property policies. For example, if you do a land contract purchase, you could take out a policy on the home or property and list the person you purchased the land from as an additional insured. If any claims were to be made, you’d both receive a payout. Additional insureds can also file claims.
Understanding additional interest vs. additional insured in car insurance
Most insurance companies 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.
|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||An additional insured is 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||An additional interest is 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.|
In most cases, adding an additional interest to your insurance policy will likely 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 will not typically impact your premium unless the additional insured is also a listed driver on the policy. In that case, insurance agents 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.
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 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 is slightly different from home and condo insurance because you do not own the physical building. If your landlord requires you to have renters insurance as part of your lease agreement, they might request to get added to your policy as an additional interest. This way, your landlord would be notified should your policy lapse. If you have an adult child that you live with, you could list them as an additional insured if you want to be covered under the same policy.
Why it matters
When it comes to additional insureds versus additional interests, it is important to know the differences. When you finance a big purchase, like a house or a car, it is likely that you will need to list a lender as an additional interest. And, if you make a big purchase with another person, you will 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 potentially impact your rate, depending on the policy type. Because you would both have the ability to make claims, you could be impacted by the claim filing frequency of the additional insured. Make sure you understand how adding an additional insured could affect your insurance costs and find ways to lower your premium if needed.