Defining Additional Interest vs. Additional Insured
It’s important to make sure you know the difference between an additional interest vs. additional insured, so you don’t add the wrong one to your insurance policy.
Let’s look at what each one means and how to differentiate between the two.
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 an insurance policy is in place but doesn’t need the coverage.
Additional interests that are added to insurance policies are notified when changes to the policy are made. These changes include policy cancellations, lapses in coverage, and renewals, or failure to renew a 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 by way of an endorsement.
When somebody is named as an additional insured, they are afforded protection under the policy and given the right to make claims on the policy.
As opposed to an additional interest, a small cost comes with adding an additional insured to a policy.
Examples of Additional Interest vs. Additional Insured
Let’s look at some differences between additional interests and additional insureds and the policies they are most often found in.
In car insurance, an additional interest could be added to your policy if your car is financed. Your lienholder doesn’t need the coverage from your policy, but they want to assure you have coverage so if an accident happened, they would still receive payment.
An additional insured in car insurance is anybody with ownership in the vehicle. For example, when you lease a car, you are not the owner, so the leasing company should be named as an additional insured on your policy. This way they receive payment in the case of a loss, and you are not stuck paying them.
Mortgage lenders could request to be added as an additional interest in a homeowner’s policy. Lenders have a personal stake in homes they give out loans for and want to be able to assure coverage is in place, so they are not left unpaid in the case of a loss.
If a property is shared by multiple people who have ownership in it, each owner should be listed as an additional insured on the policy. This is common in vacation homes or shared family homes.
A lot of times a property owner will request to be added as an additional interest on your renter’s insurance policy. This keeps them informed of any changes made to the policy.
Listing your property owner as an additional interest in your policy is a good idea because they have a personal stake in the property and want to assure you have the right coverage.
Listing your property owner as an additional insured on your renter’s insurance policy is never a good idea. If something were to happen and you cause damage, your property owner cannot make a claim against your policy if they are an additional insured. This will leave you responsible for the cost of damages.
Knowing the Difference
At times it can be difficult to determine the difference between an additional interest and an additional insured, especially since they sound so similar!
If you ever find yourself in the position where you are unsure if you should be adding an additional interest vs. additional insured ask yourself this simple question: does this third party need the benefits of coverage under my insurance policy? If the answer is no, it is likely they just need to know of any changes made to the policy and they should be added as an additional interest.