Additional interest and additional insured are among the more commonly misunderstood terms in insurance. They are often used interchangeably, but they refer to different parties.
An additional interest has a vested “interest” in the item or property being insured but has no actual ownership of it. This is most often an entity like a bank or other lender who wants to be kept up to date on how the item is being protected.
An additional insured party often holds partial ownership of what’s being insured. It is important that anyone with partial ownership of the insured interest is listed on your policy. This person may be added to your policy as an endorsement. You can find any additional insureds listed on your insurance policy’s declarations page.
Additional interest vs. additional insured in car insurance
There's often confusion around the definitions of additional insured, named driver, and listed drivers on car insurance policies. To whom these labels apply — and what they protect — may vary substantially.
A named driver policy only covers drivers explicitly listed as named drivers on the policy. This means that any driver not listed is not covered. Permissive use is not honored in this situation, so it is not advised that you loan your car to any driver not specifically named. A listed driver is anyone listed on the policy who uses the vehicle more than once a month. This includes anyone who lives with you who is of driving age.
An additional insured party in car insurance is someone with a stake in the ownership of the vehicle. Here are some of the situations which would lead to listing an additional insured on a car insurance policy:
- A leased vehicle: Since you don’t own a leased vehicle, your leasing company should be listed as an additional insured. The company will receive a payout in the event of a total loss.
- Cosigner: A cosigner to a vehicle loan is entitled to recoup losses in the event a vehicle is a total loss.
The additional interest is usually an entity who wants to ensure that coverage is continued. If you are financing your car, for instance, your lienholder could be listed as an additional interest. An additional interest receives no coverage but wants to keep insurance in place to protect the vehicle. As such, they can require the maintenance of certain coverages, including collision and comprehensive.
These coverage types protect a bank’s investment more fully than do less robust insurance levels. Should you lower or drop your coverage, additional interests will be notified. In some cases, this can lead to the required acquisition of forced insurance. This cost may be added to the monthly car payment you make to the lienholder.
Additional interest vs. additional insured in homeowners insurance
If the ownership of a home or a piece of property is divided amongst multiple people, each of them should be listed as an additional insured. Shared vacation properties, cabins, or homes bequeathed to multiple parties are common examples of properties with more than one owner. It is very important that only parties with ownership be listed as an additional insured, as this ensures they'll be covered by the policy, earning the ability to make claims.
A mortgage lender, however, can be listed as an additional interest. Because of the relatively large size of a home loan, lenders have a vested interest in a property's protection. As such, a lender may request inclusion as an additional interest on a homeowners insurance policy.
Additional insured vs. additional interest in renters insurance
Some landlords may require you to list them on your renters insurance policy. Like lienholders for car insurance and mortgage lenders in homeowners, your landlord becomes an “additional interest” in this scenario. Many landlords do this as a way to verify that you are carrying the renters insurance that might be required in your lease.
Being listed as an additional interest on their tenant's renters insurance policy allows a landlord to stay informed of any policy modifications or non-renewals. It's a simple way for a landlord to ensure their rental property is protected. A landlord listed as an additional interest does not have coverage via the policy, and cannot file claims (unless the claim comes against your liability coverage for damages or injuries you caused).
Listing a landlord as an additional insured is — in most cases — a bad idea. It essentially extends your coverage to them, which can lead to confusion if a claim needs to be filed. It’s a better idea for a landlord to be listed as an additional interest.
Additional interest vs. additional insured in condo insurance
As a condo is typically a part of a larger building or complex, your condo association holds an interest in the insurance you carry. Maintaining appropriate condo coverage ensures any potential damage you cause to common areas, your building, or to others is covered.
Because your condo association does not own your unit, however, it does not receive coverage. As an additional interest, your condo association is merely kept up to date on your policy and any changes that may occur.
Knowing the difference between additional interest and additional insured can save you some confusion down the line. It can also have legal implications in some cases: listing someone erroneously as an additional insured can muddy the waters of claims eligibility.
Remember: additional insureds hold an ownership stake and can be the beneficiary of the insurance policy, while additional interests are not covered by the policy and are typically a company or other entity who has an interest in protecting an investment.